In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k*), in terms of output per effective worker (f(k*)), is (denoting the depreciation rate by δ):
A)sf(k)/(δ + n + g).
B)s/((f(k))( δ + n + g)).
C)f(k)/((s)( δ + n + g)).
D)(s - f(k))/( δ + n + g).

Question

Quizplus · Accepted Answer

In a steady-state economy, the steady-state ratio of capital per effective worker (k*) is determined by the equation sf(k*) = (δ + n + g)k*. Solving for k* in terms of f(k*), we get k* = sf(k*)/(δ + n + g).

In a Steady-State Economy with a Saving Rate S, Population