According to the Solow-Swan model of growth, government policies which are designed to increase the savings...

According to the Solow-Swan model of growth, government policies which are designed to increase the savings rate will have no effect on growth in the very long run and may, under certain circumstances, actually reduce aggregate consumption in the long run.

Please evaluate the statement as either TRUE,FALSE or UNCERTAIN. Please illustrate your answers with diagrams and/or algebra when appropriate.

Solutions

Expert Solution

The given statement is True. According to Solow-Swan model of growth, government policies which are designed to increase the savings rate will have no effect on growth in the long run and may in the certain circumstances lead to reduction in aggregate consumption level.

Rahul Sunny answered 1 year ago

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