Consider an Economy That Is Operating at Its Steady State

question 27

Multiple Choice

Consider an economy that is operating at its steady state.An increase in the investment rate in this economy will lead to:

• A) an increase in the growth rate of output in both the short run and long run.
• B) no change in the growth rates of either capital or output in either the short run or the long run,since the economy is already in the steady state.
• C) an increase in the growth rate of output in the short run but lower overall growth in the long run as a result of increased depreciation.
• D) an increase in the growth rate of output in the short run but zero growth in output in the long run.

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Definitions:

Drive-Reduction

A theory in psychology that explains motivation as being based on the goal of reducing needs created by physiological drives or states.

Homeostatic

Pertaining to homeostasis, the regulation of internal conditions within an organism to maintain stable, constant conditions for survival.

Bodily Needs

Basic physiological requirements for human survival, such as food, water, shelter, and sleep.

Reciprocity

The practice of exchanging things with others for mutual benefit, especially in social and emotional contexts.