In the Solow Model, Saving and Investing in Additional Factories

question 80

Multiple Choice

In the Solow model, saving and investing in additional factories and computers does ________ if the economy is below Y*. But, in the long run, the ________ accumulation lead the return to these investments to fall.

• A) lead output to grow in the medium run; diminishing returns to capital
• B) lead output to grow in the long run; increasing returns to capital
• C) lead output to grow in the medium run; increasing returns to capital
• D) not lead output to grow in the medium run; diminishing returns to capital
• E) not lead output to grow in the long run; increasing returns to capital

---

Definitions:

Independent Variable

In experimentation or statistical analysis, the variable that is manipulated or changed to observe its effects on the dependent variable.

Dependent Variable

In statistical and mathematical analysis, the variable whose value is subject to the influence of another variable.

Horizontal Axis

In graphs and charts, this axis typically represents the independent variable or time period under examination.

Vertical Axis

The “up-down” or “north-south” measurement line on a graph or grid.