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Which of the following is not an assumption of the Solow model? The capital stock depreciates...

Which of the following is not an assumption of the Solow model?

The capital stock depreciates at a constant rate.

The marginal product of capital diminishes as the capital stock becomes greater.

The capital stock and TFP grow at the same rate.

Aggregate savings are directed towards capital investment.

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Answer #1

Solution:-The marginal product of capital diminishes as the capital stock becomes greater. is not an assumption of the Solow model.

Explaination:-

Assumptions of the Solow model:-

The capital stock depreciates at a constant rate.

The marginal product of capital diminishes as the capital stock becomes greater.

The capital stock and TFP grow at the same rate.

Professor R.M. Solow builds his model of economic growth as an alternative to the Harrod-Domar line of thought without its crucial assumption of fixed proportions in production. Solow postulates a continuous production function linking output to the inputs of capital and labour which are substitutable.

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