İKTİSADA GİRİŞ II - Deneme Sınavı - 1

An increase in the rate of population growth causes long-run output, consumption, and capital per worker to fall because with higher population growth more output must be used to equip new workers with capital, leaving less output available for consumption or to increase capital per worker.

According to Snowdon and Vane (2005) the model has many shortcomings. Firstly, the model assumes a fixed capital-output ratio. The second weakness of the model is in the requirements financing gap in case of a low actual savings ratio relative to desired levels. The model assumes that inflows would go into investment one to one. Also, the model assumes zero substitutability
between capital and labor.