Suppose That an Economy Is in Its Steady State and the Capital

question 64

Multiple Choice

Suppose that an economy is in its steady state and the capital stock is above the Golden Rule level. Assuming that there are no population growth or technological change, if the saving rate falls:

• A)output, consumption, investment, and depreciation will all decrease.
• B)output and investment will decrease, and consumption and depreciation will increase.
• C)output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state.
• D)output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

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Definitions:

Republic Credits

In the Star Wars universe, Republic Credits are a form of currency that was used by the Galactic Republic for transactions and trades, not applicable in real-world economics.

Marginal Product

The additional output resulting from using one more unit of a particular input, holding other inputs constant.

Total Revenue

The total amount of money a company receives from its sales of goods or services, calculated before any expenses are subtracted.

Total Output

The total quantity of goods and services produced in an economy over a specific period of time.