If an economy is in a steady-state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

a. output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

b. output, consumption, investment, and depreciation will all decrease.

c. output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state.

d. output and investment will decrease, and consumption and depreciation will increase.

Question

Business

Danielle Riley

26 May, 21:57

If an economy is in a steady-state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

a. output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

b. output, consumption, investment, and depreciation will all decrease.

c. output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state.

d. output and investment will decrease, and consumption and depreciation will increase.

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Answers (1)

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Benjamin Vaughn · Answer 1

Answer: A. output, investment, and depreciation will decrease and consumption will increase and then decrease but finally approach a level above its initial state.

Explanation: from the above question, an economy that is in a steady-state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls then output, investment, and depreciation will decrease and consumption will increase and then decrease but finally approach a level above its initial state.