Many policymakers are concerned that Americans do not save enough. Using the Solow growth model, with no technological change and no population growth, explain why:

a. for a given production function and depreciati on rate, the saving rate determines the level of output per worker.
b. a higher saving rate will not necessarily generate more consumpti on per worker.
c. a higher saving rate will not produce a faster steady-state growth rate of output per worker.

Question

Many policymakers are concerned that Americans do not save enough. Using the Solow growth model, with no technological change and no population growth, explain why:

a. for a given production function and depreciati on rate, the saving rate determines the level of output per worker.
b. a higher saving rate will not necessarily generate more consumpti on per worker.
c. a higher saving rate will not produce a faster steady-state growth rate of output per worker.

Quizplus · Accepted Answer

The Answer of Many policymakers are concerned that Americans do not save enough. Using the Solow growth model, with no technological change and no population growth, explain why:

a. for a given production function and depreciati on rate, the saving rate determines the level of output per worker.
b. a higher saving rate will not necessarily generate more consumpti on per worker.
c. a higher saving rate will not produce a faster steady-state growth rate of output per worker.

Many Policymakers Are Concerned That Americans Do Not Save Enough