An analysis of the Solow growth model in relation to the savings and the long run growth of the economy.
a) Is it possible for a country to save TOO MUCH? What is the long run goal assumed in the Solow growth model, and how is saving supposed to help achieve it?
b) Elucidate a graph of the Solow model, indicating the position of the golden rule level of saving (SR), and explain why it is preferred.
c) Indicate on the same graph the steady state for a country that is saving TOO MUCH., and explain why this is an inderior situation.