At the Current Steady State Capital- Labour Ratio, Assume That

question 62

Multiple Choice

At the current steady state capital- labour ratio, assume that the steady state level of per capita consumption, (C/N) *, is less than the golden rule level of steady state per capita consumption. Given this information, we can be certain that:

• A) An increase in the saving rate will cause an increase in the steady state level of per capita consumption ((C/N)*).
• B) A decrease in the capital- labour ratio will cause a decrease in (C/N)*.
• C) The capital- labour ratio will tend to increase over time.
• D) A decrease in the saving rate will have an ambiguous effect on (C/N)*.
• E) The capital- labour ratio will tend to decrease over time.