1. At the current steady state capital-labor ratio, assume that the steady state
ID: 1113315 • Letter: 1
Question
1. At the current steady state capital-labor ratio, assume that the steady state level of per capita consumption, (CN, is less than the golden rule level of steady state per capita consumption. Given this information, we can be certain that an increase in the saving rate will cause an increase in the steady state level of per capita consumption ((C/N)*) C a reduction in the capital-labor ratio will cause a reduction in (C/N)* O the capital labor ratio will tend to increase over time O the capital labor ratio will tend to decrease over time O a reduction in the saving rate will have an ambiguous effect on (CN* 2. Suppose the following situation exists for an economy: Kt+1/N- KtN. Given this information, we know with certainty that C the economy is operating at the golden rule equilibrium in period t. C saving per worker is less than depreciation per worker in period t. saving per worker is greater than depreciation per worker in period t. investment per worker equals depreciation per worker in period t. 3. Suppose the saving rate is initially less than the golden rule saving rate. We know with certainty that a reduction in the saving rate will cause O a reduction in the capital labor ratio C a reduction in output per worker O a reduction in consumption per worker all of the above none of the above 4. Suppose the economy is initially in the steady state. An increase in the depreciation rate (5) will cause a reduction in KN a reduction in YN reduction in C/N all of the above none of the above aExplanation / Answer
1. The correct answer is A.
2. The correct answer is D.
3. The correct answer is D.
4. The correct answer is A.
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