In the Solow model, the parameter denotes ________ and is ________.
A) investment; less than one
B) the depreciation rate; equal to zero
C) consumption; greater than one
D) the depreciation rate; less than one
E) investment; greater than one

Question

In the Solow model, the parameter  denotes ________ and is ________.
A) investment; less than one 
B) the depreciation rate; equal to zero 
C) consumption; greater than one 
D) the depreciation rate; less than one 
E) investment; greater than one

Quizplus · Accepted Answer

The parameter 11eab38d_0751_e6e0_a5fb_03c8d0c54a75_TB6622_11 in the Solow model represents the depreciation rate, which is the amount of capital that becomes unusable or outdated over time. By definition, the depreciation rate cannot be greater than one because that would imply that the capital stock is decreasing faster than it can be replaced through investment. Additionally, a depreciation rate of zero would mean that no capital becomes obsolete, which is unrealistic. The most plausible answer is therefore D, which states that the depreciation rate is less than one.

In the Solow Model, the Parameter Denotes ________ and Is