In the Solow Model,an Increase in Investment Leads To

question 74

Multiple Choice

In the Solow model,an increase in investment leads to:

• A) an increase in growth rates in the short run but a return to zero growth in the long run as the economy converges to a new,higher steady state.
• B) an increase in growth rates in both the short run and the long run,as new investment will lead to permanently higher levels of the capital stock.
• C) a decrease in growth rates in both the short run and the long run,as fewer resources are available for production following the increase in investment.
• D) no change in growth rates.

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