In the Solow model,in every period,a fraction of total output __________,which __________.

Question

Quizplus · Accepted Answer

In the Solow model, a fraction of total output is saved, which adds to next period's capital stock. This is because saving creates investment, which in turn increases the capital stock, leading to economic growth. Depreciation refers to the reduction in the value of existing capital stock due to wear and tear over time, which reduces next period's capital stock. Consumption refers to the portion of total output that is used for immediate satisfaction of wants or needs, and it does not contribute to the accumulation of capital stock. Therefore, option C is the correct answer.

In the Solow Model,in Every Period,a Fraction of Total Output