Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know with certainty that:
A) the rate of growth of output is positive in period t.
B) saving per worker is greater than depreciation per worker in period t.
C) saving per worker is less than depreciation per worker in period t.
D) investment per worker equals depreciation per worker in period t.
E) the economy is operating at the golden rule equilibrium in period t.

Question

Quizplus · Accepted Answer

The formula given shows that the capital stock per worker in period t+1 is equal to the capital stock per worker in period t (assuming labor input remains constant). This implies that investment per worker in period t is equal to depreciation per worker, since investment is what increases the capital stock and depreciation is what reduces it. Therefore, choice D is the correct answer.

Suppose the Following Situation Exists for an Economy: Kt+1/N =