Refer to the following figure when answering
Figure 5.4: Solow Diagram
-Consider the Solow model exhibited in Figure 5.4. If a country's savings rate increases, the economy would:
A) move from point a to point b
B) move from point c to point a
C) move from point c to point b
D) move from point a to point c
E) stay at point b

Question

Refer to the following figure when answering  
Figure 5.4: Solow Diagram 
-Consider the Solow model exhibited in Figure 5.4. If a country's savings rate increases, the economy would:
A) move from point a to point b 
B) move from point c to point a 
C) move from point c to point b 
D) move from point a to point c 
E) stay at point b

Quizplus · Accepted Answer

In the Solow model, an increase in the savings rate leads to a higher steady-state level of capital per worker, moving the economy from a lower steady-state (point a) to a higher one (point b).

Refer to the Following Figure When Answering