When an economy is operating at the steady state,we know that
A)steady state saving equals consumption.
B)steady state saving is less than total consumption.
C)steady state saving is equal to depreciation per worker.
D)steady state saving exceeds depreciation each year by a constant amount.
E) none of the above

Question

Quizplus · Accepted Answer

In the steady state, the economy is not growing, so there is no net investment. Therefore, the amount saved (which includes investment) must be exactly equal to the amount that is being depreciated (which includes the wear and tear on capital goods) to maintain the capital stock at a constant level. Therefore, steady state saving is equal to depreciation per worker. Choices A, B, and D are incorrect.

When an Economy Is Operating at the Steady State,we Know