The Convergence to a Steady-State Capital-Labor Ratio K* Is Ensured

question 25

Multiple Choice

The convergence to a steady-state capital-labor ratio k* is ensured by the fact that if k is at a level

• A)lower than k*, saving will exceed the investment required to maintain a constant k, causing k to rise
• B)lower than k*, investment will exceed saving, leading to an increase in the capital stock
• C)lower than k*, saving will exceed the investment required to maintain a constant k, causing output per capita to decline
• D)higher than k*, the rate of depreciation will be higher than the savings rate, causing k to decrease
• E)higher than k*, output per capita will continue to increase until a new steady-state equilibrium is reached

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Definitions:

Bonds Dated

The date specified in the bond document when the bond was issued, important for determining interest payments and maturity.

Fair Value

An estimate of the price at which an asset would be bought or sold in a current transaction between willing parties, not under compulsion.

Market Price

The prevailing market rate at which transactions for assets or services are conducted.

Investment Sold

The act of divesting an asset or security, converting an investment back into cash or its cash equivalent.