Question

In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained. decrease; increase decrease; decrease increase; increase increase; decrease

Answer 1

Answer:

decrease; decrease

Explanation:

In the Solow growth model, if investment is less than depreciation, the capital stock will decrease and output will decrease until the steady state is attained.

If Investment is less than depreciation, thereby resulting in capital stock shrinking and output decreasing.

The golden rule of capital stock is defined as higher consumption per worker at a steady rate.