Answer to Question #151044 in Macroeconomics for mitch

Question

How does the Solow model tie in with Venezuela

Answer 1

The Solow Model is a neoclassical growth model developed by Nobel prize winner economist Robert Solow. It analyzes the changes in the level of output of an economy over a period of time as a result of the changes in population growth rate, savings rate, and rate of technological advancement. The Solow model works under the assumption that the population growth rate is constant, consumers save a constant proportion of their income, and all firms in the economy use the same technology to produce goods and services.

Since 2010, Venezuela has experienced an economic crisis due to a high rate of population growth. Populist policies of socialism imposed by the Venezuelan regime have also affected the economy and more than seventy-five percent of the population live in poverty and cannot be able to save any proportion of their income. The industrial decline has also led to a decline in technological advancement in the production of goods and services.