When steady state capital per worker is above the golden-rule level,we know with certainty that an increase in the saving rate will
A)increase consumption in both the short run and the long run.
B)decrease consumption in both the short run and the long run.
C)decrease consumption in the short run, and increase it in the long run.
D)increase consumption in the short run, and decrease it in the long run.
E) none of the above

Question

Quizplus · Accepted Answer

When steady state capital per worker is above the golden-rule level, an increase in the saving rate will decrease consumption in both the short run and the long run because the economy is already beyond the point where the last unit of savings increases consumption.

When Steady State Capital Per Worker Is Above the Golden-Rule