Question

what are the main conclusions of the solow growth model, explain steady state as part of your answer?

Answer 1

The Solow model depicts how growth in saving and population determine an economy's steady-state capital stock and its steady state level of income per individual. It reflects how in the long run, nations that save a high fraction of their output are richer and why nations with high levels of population growth are poorer. It concludes that when nations are in their steady states i.e. when output per worker and capital per worker are constant, then:

1. Rich nations have higher saving (investment) rates than poor nations

2. Rich nations have lower population growth rates than poor nations