Author Question: In the Solow model, the faster growth of output that results from an increase in the saving rate is ... (Read 45 times)

urbanoutfitters · **on:** Jun 30, 2018

In the Solow model, the faster growth of output that results from an increase in the saving rate is temporary, because ________.

A) of diminishing marginal product of capital
B) with a larger stock of capital, consumption is encouraged more than investment
C) the rising capital stock depreciates at a faster rate
D) the economy settles into a steady state in which saving no longer rises

Question 2

Compared to adaptive expectations, rational expectations would imply that the transition between the short-run and the long-run will take:

a. the same amount of time.
b. a longer period of time.
c. a variable period of time.
d. less time.