Graphically illustrate and explain the effects of a decrease in the saving rate on the Solow growth model. In your graph, clearly label all curves and equilibria
What will be an ideal response?
The decrease in s will cause a reduction in S/N and I/N. At the initial K/N, depreciation is more than investment. Alternatively, there is not enough investment to offset the amount of capital that wears out. So, the capital stock will decrease. This will cause a decrease in K/N, Y/N, and S/N. As Y/N falls, so will C/N. This is all shown easily with the graph of the model.
Economics
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In the above figure, the marginal product of labor is zero at point
A) a. B) c. C) e. D) f.
Economics
The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of: a. a command economy. b. a mixed economy
c. a market economy. d. a traditional economy.
Economics