When the economy is in the steady state, we know with certainty that:
A) consumption per worker is maximised.
B) output per worker is maximised.
C) the saving rate is maximised.
D) the growth rate is maximised.
E) investment per worker equals depreciation per worker.

Question

Quizplus · Accepted Answer

In the steady state, the economy is at its long-term equilibrium where the amount of capital per worker remains constant. At this point, investment per worker is equal to depreciation per worker. This is because any additional investment will simply offset the depreciation of existing capital, meaning there is no net increase in capital per worker. Therefore, option E is the correct answer. Options A, B, C, and D are not necessarily true as the economy can operate below or above the steady state with varying levels of consumption, output, saving, and growth rates.

When the Economy Is in the Steady State, We Know