The implication of the Solow model is that economic growth is sustainable when ________.

Question

Quizplus · Accepted Answer

According to the Solow model, economic growth is sustainable when the amount of physical capital stock per unit of output (measured by the ratio of physical capital stock to GDP) remains constant over time. This is because as the economy grows, it needs more capital to sustain that growth. If the ratio of physical capital stock to GDP were to decrease, this would mean that the economy is becoming less efficient and productive, and growth would not be sustainable in the long run. Similarly, the ratio of saving rate to depreciation rate does not affect the long-term sustainability of growth in the Solow model.

The Implication of the Solow Model Is That Economic Growth