An implication of the Solow model is that once an economy reaches the steady state,
A) long-term growth continues indefinitely
B) long-term growth does not continue
C) long-term growth accelerates
D) long-term growth decelerates
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

The Solow model predicts that once an economy reaches the steady state, long-term growth does not continue. The steady state is a state of equilibrium where the economy's capital stock, output, consumption, and growth rates remain constant over time. Therefore, the economy has reached its maximum level of output per capita, and there is no further room for growth unless there is an increase in productivity or technological progress.

An Implication of the Solow Model Is That Once an Economy