Question

If an economy is in a steady state with no population growth or technological change, and the marginal product of capital is less than the depreciation rate:

A) the economy is following the Golden Rule.

B) steady-state consumption per worker would be higher in a steady state with a lower saving rate.

C) steady-state consumption per worker would be higher in a steady state with a higher saving rate.

D) the depreciation rate should be decreased to achieve the Golden Rule level of consumption per worker.

Answer 1

B) steady-state consumption per worker would be higher in a steady state with a lower saving rate.

Step-by-step explanation:

In the case when the economy is in the steady state along with there is no growth in the population or no change in technology so the marginal product of capital would be lowered than the depreciation rate as the steady sate consumption per worker would be more than the steady state having less saving rate

Therefore the option b is correct