The steady state is defined as a long-run equilibrium at which capital, labor, and output all grow at the same rate.To be in a steady state in a neoclassical model, which of the following equations has to be satisfied?
A)y = (n - d)k
B)sy = (n + d)k
C)sf(k) = (n - d)k
D)sy = nk + d
E)y = f(k)= sk + nd

Question

Quizplus · Accepted Answer

The steady state occurs when the economy's savings rate (s) times the economy's capital stock (k) is equal to the sum of the depreciation rate (d) and the growth rate of the labor force (n): sy = (n + d)k. This implies that the economy is reinvesting a portion of its output into capital accumulation to maintain a constant capital-labor ratio in the long run.

The Steady State Is Defined as a Long-Run Equilibrium at Which