In the steady-state diagram of the Solow model,an increase in saving per worker is shown by
A)shifting the saving-per-worker curve down, resulting in a lower steady-state capital-labor ratio.
B)shifting the saving-per-worker curve up, resulting in a higher steady-state-capital-labor ratio.
C)shifting the saving-per-worker curve up, resulting in a lower steady-state capital-labor ratio.
D)shifting the saving-per-worker curve down, resulting in a higher steady-state capital-labor ratio.

Question

Quizplus · Accepted Answer

According to the Solow model, an increase in saving per worker results in a higher steady-state capital-labor ratio. This means that the saving-per-worker curve shifts upwards, as a higher saving rate leads to higher investment and capital accumulation, and therefore a higher level of output per worker in the long run.

In the Steady-State Diagram of the Solow Model,an Increase in Saving