With steady state growth:
A)( y/y)* = ( k/k)*
B)y/k is constant.
C)( y/y)*= g/(1- )
D)all of the above.

Question

With steady state growth:
A)( y/y)* = ( k/k)* 
B)y/k is constant. 
C)( y/y)*= g/(1- ) 
D)all of the above.

Quizplus · Accepted Answer

Steady state growth implies that the economy is growing at a constant rate, which means that the ratios of output to capital (y/k) and capital to output (k/y) are also constant. Therefore, option A is true. Additionally, since y/k is constant, option B is also true. Finally, the steady state growth rate (g) can be expressed as g = s* (f(k) - δk) / y, where s is the saving rate, f(k) is the production function, δ is the depreciation rate, and y is the output. Since y/k is constant, we have f(k)/k = y/k, and hence g = s*(f(k)/k - δ). Solving for f(k)/k, we get f(k)/k = g/s + δ. This implies that y/y* = f(k)/k - δk/k = g/k - δ. Hence, option C is also true. Therefore, the correct choice is D.

With Steady State Growth