In the Solow Growth Model,from an Initial Steady State with Fixed

question 80

Multiple Choice

In the Solow growth model,from an initial steady state with fixed values of A,d,and n,an increase in the national saving rate causes the standard of living to

• A)rise temporarily,and then fall back to its initial level.
• B)rise and then hold constant at a new higher level.
• C)grow at a slower rate temporarily,and then return to the initial growth rate.
• D)grow at a permanently faster rate.
• E)not change at all in the short run or the long run.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in the valuation of investments.

Time Periods

Distinct intervals of time within which certain activities or events occur or are completed.

Simple Interest

Simple interest is a method of calculating the interest charge on a loan based on the original principal balance without compounding.

Rate of Return

The financial improvement or decline in an investment across a particular period, indicated as a percentage of the investment’s entry cost.