In the Solow model production function, an increase in capital stock with all other variables held constant will ________ the country's real Gross Domestic Product but at a(n) ________ rate.
A) increase; decreasing
B) decrease; decreasing
C) increase; increasing
D) decrease; increasing

Question

Quizplus · Accepted Answer

In the Solow model, as capital stock increases, the country's real GDP increases, but due to diminishing returns to capital, the rate of increase in GDP decreases.

In the Solow Model Production Function, an Increase in Capital