Final answer:
The mechanism in the Solow model that generates growth is technological progress and the accumulation of physical capital. However, in the long run, it fails to deliver economic growth due to diminishing returns.
Step-by-step explanation:
In the Solow model, economic growth is generated by technological progress and the accumulation of physical capital. Technological progress refers to improvements in technology and production methods, which increase overall productivity. Physical capital refers to the stock of machinery, equipment, and infrastructure that is used in the production process.
This mechanism is appealing because it suggests that sustained economic growth can be achieved through investments in technology and physical capital. As technological progress continues to improve and physical capital accumulates, productivity increases, leading to higher levels of output.
However, in the long run, the Solow model fails to deliver economic growth because of the concept of diminishing returns. As more and more physical capital is accumulated, the marginal productivity of capital decreases. Eventually, the gains from capital accumulation become smaller and smaller, leading to a slowdown in economic growth.