Figure 4.1
Determinants
of k/k
-In Figure 4.1, an increase in the depreciation rate:
A)increases k*.
B)does not affect k*.
C)decreases k*.
D)makes k* zero.

Question

Figure 4.1
Determinants
of  k/k 
-In Figure 4.1, an increase in the depreciation rate:
A)increases k*. 
B)does not affect k*. 
C)decreases k*. 
D)makes k* zero.

Quizplus · Accepted Answer

An increase in depreciation rate decreases the value of capital over time, which in turn decreases the amount of steady-state capital per effective worker (k*). Therefore, the correct choice is C.

Figure 4.1 Determinants