From an Initial Steady State,suppose a Government Policy Increases the National

question 30

Multiple Choice

From an initial steady state,suppose a government policy increases the national saving rate,causing the capital stock to start growing faster than the population.With (K/N) now rising,the Solow growth model goes on to say that (Y/N)

• A)will rise only so far,to where the increased requirement for new capital matches the increased saving.
• B)will rise only temporarily,so long as the population growth rate remains constant.
• C)will rise and keep on rising,so long as the national saving rate exceeds the population growth rate.
• D)never does rise,since the government's policy does not affect either the population growth rate or the depreciation rate.

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