QUESTIONS FOR REVIEW

Question 8.1

1. In the Solow model, how does the saving rate affect the steady-state level of income? How does it affect the steady-state rate of growth?

Question 8.2

2. Why might an economic policymaker choose the Golden Rule level of capital?

Question 8.3

3. Might a policymaker choose a steady state with more capital than in the Golden Rule steady state? With less capital than in the Golden Rule steady state? Explain your answers.

Question 8.4

4. In the Solow model, how does the rate of population growth affect the steady-state level of income? How does it affect the steady-state rate of growth?

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