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    Question

    In the long run, the steady state rate of growth of a capitalist economy 

    A Falls with the savings propensity Correct Answer Incorrect Answer
    B Rises with the incremental capital output ratio Correct Answer Incorrect Answer
    C Rises with the savings propensity but falls with the incremental capital output ratio Correct Answer Incorrect Answer
    D Falls with the savings propensity but rises with the incremental capital output ratio Correct Answer Incorrect Answer

    Solution

    In the long−run, the steady state rate of growth of a capitalist economy rises with savings propensity but falls with the incremental capital output ratio. As from Harrod-Domar Model we have, Gy = s / q .

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