In the Simple Solow Model, We Assume

question 51

Multiple Choice

In the simple Solow model, we assume:

• A) the depreciation rate is negative.
• B) net investment is always positive.
• C) TFP equals one.
• D) labor is exogenous.
• E) the saving rate changes frequently.

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Definitions:

Income Effect

How an alteration in income for either a person or an economic system influences the demand levels for a certain good or service.

Price Ceiling

A legally imposed maximum price on goods or services, beyond which they cannot be sold.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price.

Surplus

A situation where the quantity supplied exceeds the quantity demanded, or when revenues exceed expenses.