In the Solow growth model of Chapter 8, investment equals:

Question

Quizplus · Accepted Answer

According to the Solow growth model, investment is determined by the savings rate. Therefore, investment equals saving, and the correct choice is D. Option A is incorrect because in the model, output is determined by the production function, which depends on capital, labor, and technology. Option B is incorrect because consumption is not directly related to investment in the model. Option C is incorrect because the marginal product of capital is not equal to investment, but it represents the additional output that can be produced by adding one more unit of capital.

In the Solow Growth Model of Chapter 8, Investment Equals