-(Figure: The Solow Model)In the accompanying graph of the Solow model,if the production function shifts from Y₁ to Y₂ while capital remains at K₁,then the capital stock will:

Question

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In the Solow model, if the production function shifts upwards (indicating an increase in productivity or technological improvement), the economy will generate more output for any given level of capital. This leads to higher savings and investment, which in turn increases the capital stock until it reaches a new, higher steady-state level.

-(Figure: the Solow Model)In the Accompanying Graph of the Solow