See why saving and capital build a richer steady state — but only productivity sustains long-run growth.
Understand why capital accumulation alone yields a steady state rather than perpetual growth, and that only productivity shifts long-run living standards.
Raise the savings rate (s) from 25% toward 50% and watch the transition chart.
Before you act, predict what will happen. Did long-run growth speed up and stay fast, or did output settle at a new, higher level and then flatten again? Then do it — did your prediction match what happened?
The Solow diagram
Saving (s·y) has diminishing returns; break-even investment (n+δ)·k is a straight line. Where they cross is the steady-state capital per worker, k*.
Transition to the steady state
Output per worker over time, starting from a low capital stock. Growth is fast at first, then peters out as the economy approaches k* — capital accumulation alone cannot sustain it.