Suppose the following situation exists for an economy: Kt₊₁ / N = Kt / N.Given this information,we know that
A)saving per worker equals depreciation per worker in period t.
B)saving per worker is less than depreciation per worker in period t.
C)saving per worker is greater than depreciation per worker in period t.
D)the saving rate fell in period t.
E) steady state consumption is equal to the golden rule level of steady state consumption.

Question

Quizplus · Accepted Answer

The equation Kt₊₁ / N = Kt / N implies that capital per worker is constant over time. Therefore, the economy is at its steady state. In the steady state, saving per worker is equal to depreciation per worker. This means that the amount of saving (investment) is just enough to replace the amount of capital that is worn out (depreciated) during the production process. Hence, option A is the correct answer.

Suppose the Following Situation Exists for an Economy: Kt₊₁