In the Solow model,investment,
,as a function of saving,
,and output,
,is written as:
A) .
B) .
C) .
D) .
E) .

Question

In the Solow model,investment, 
,as a function of saving, 
,and output, 
,is written as:
A) . 
B) . 
C) . 
D) . 
E) .

Quizplus · Accepted Answer

According to the Solow model, the investment function is given by the equation:

I = sY

where I is investment, Y is output, and s is saving rate. This equation shows that investment is directly proportional to both output and saving. Therefore, option B (I = a + bY + cs) is the best choice as it includes both Y and s in the form sY.

In the Solow Model,investment