If an Economy Is in a Steady State with No

question 79

Multiple Choice

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

• A) a policymaker should definitely take all possible steps to increase the saving rate.
• B) if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs.
• C) if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs.
• D) if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

---

Definitions:

Actual Production

Refers to the quantity of goods that have been produced within a given time frame, as opposed to planned or theoretical production levels.

Direct Labour Variance

The difference between the actual direct labor costs incurred and the standard costs for the actual production achieved.

Direct Labour Standards

Benchmarks for the amount of labor time that is expected to be necessary to produce a unit of product or to complete a process.

Total Cost

The complete cost of production, including both fixed and variable costs.