In the textbook model of endogenous growth,long-run output growth would increase if there were either a ________ in the saving rate or a ________ in the depreciation rate.
A)rise; rise
B)rise; fall
C)fall; rise
D)fall; fall

Question

Quizplus · Accepted Answer

In the textbook model of endogenous growth, long-run output growth is positively related to the saving rate, meaning that an increase in the saving rate (rise) would lead to long-run output growth. Additionally, long-run output growth is negatively related to the depreciation rate, meaning that a decrease in the depreciation rate (fall) would lead to long-run output growth. Therefore, the correct answer is B, where there is a rise in the saving rate or a fall in the depreciation rate.

In the Textbook Model of Endogenous Growth,long-Run Output Growth Would