This Demonstration shows the steady levels of output, , and capital given the parameters. Note that when the savings rate increases, the steady state level of output increases; thus when the savings rate increases, the economy will grow from the old steady state to the new steady state. When the new steady state is reached, however, growth stops. Thus the Solow model indicates that growth must come from a factor that can in principle continue to increase over time, thus the Solow model turns our attention to technology or increases in . See [1] for more discussion.

The parameters have been set to fit well with the discussion of the simple Solow model in [1].

Move the cursor over the functions to see the definitions.

The steady state level of capital, , can be very large for some combinations of parameters, and in this case the plot range can be extended.