The Solow model assumes the saving rate is:
A) zero.
B) constant.
C) decreasing as income increases.
D) increasing as income increases.
E) larger as the interest rate rises.

Question

Quizplus · Accepted Answer

The Solow model assumes a constant saving rate, which means that the proportion of income saved remains the same regardless of changes in income or interest rates. This assumption allows for the analysis of long-run growth and steady-state equilibrium.

The Solow Model Assumes the Saving Rate Is