Answer: Yt = Ct + It
Explanation:
If Ct denotes consumption, It denotes investment, and Yt is output, the resource constraint in the Solow model is Yt = Ct + It.
The Solow model believes that when there is a sustained increase in the capital investment, there is a temporary rise in growth rate. It should be noted that savings equals investment and also income is the addition of consumption and savings. Therefore,
Yt = Income
Ct = Consumption
It = Investment = Savings
Therefore, Yt = Ct + It
