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Answer :
A decrease in the saving rate will shift the saving-per-worker curve downward and decrease the steady-state capital stock per worker.
The saving-per-worker curve in the Solow model represents the relationship between the saving rate and the steady-state capital stock per worker. When the saving rate decreases, it means that a smaller proportion of income is being saved and invested. As a result, the saving-per-worker curve shifts downward.
With a lower saving rate, there will be less capital accumulation over time, leading to a decrease in the steady-state capital stock per worker. This means that the economy will have a smaller amount of physical capital available for each worker, which can result in lower productivity and economic output.
A lower saving rate implies reduced investment, limiting the ability to finance new capital goods and replace depreciated ones. As a consequence, the depreciation line becomes steeper, reflecting a higher rate of capital stock reduction. This further contributes to a decrease in the steady-state capital stock per worker.
In summary, a decrease in the saving rate will shift the saving-per-worker curve downward and decrease the steady-state capital stock per worker. This reduction in capital stock can have adverse effects on productivity and economic growth.
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