Suppose that the level of capital in the economy is 100 units,the depreciation rate is 5 percent,and investment is equal to 10 units.In this case,
A) the level of capital will increase.
B) the economy is in a steady state.
C) the level of capital will decrease.
D) the level of output will decrease.
E) investment is less than net investment.

Question

Quizplus · Accepted Answer

The level of capital will increase because investment (10 units) is greater than depreciation (5% of 100 units = 5 units), leading to a net increase in capital.

Suppose That the Level of Capital in the Economy Is