In the Solow model with constant technological knowledge ( A), if the economy is initially below its steady-state capital stock: A.economic growth will occur.B.the economy will remain at its current output level.C.depreciation will cause the capital stock to decline.D.economic decline will occur

In the Solow model with constant technological knowledge ( A), if the economy is initially below its steady-state capital stock:
A.economic growth will occur.B.the economy will remain at its current output level.C.depreciation will cause the capital stock to decline.D.economic decline will occur

Answer

• economic growth will occur
  Explanation:
  If the economy is below its steady-state capital stock, it will spend more on investment and less on consumption. This implies that the standards of living will decline in the short run, while output per worker with employed technology will increase sharply in the short run. More investment means more demand and more output which will improve the economy.