The capital-output ratio is said to be in equilibrium
A) when it is equal to the saving rate multiplied by the sum of the growth rates of the labor force, the efficiency of labor and the depreciation of capital.
B) when it is equal to the saving rate divided by the sum of the growth rates of the labor force, the efficiency of labor and the depreciation of capital.
C) when it is equal to the saving rate minus the sum of the growth rates of the labor force, the efficiency of labor and the depreciation of capital.
D) when it is equal to the saving rate plus the sum of the growth rates of the labor force, the efficiency of labor and the depreciation of capital.

Question

Quizplus · Accepted Answer

The capital-output ratio is in equilibrium when it equals the saving rate divided by the sum of the growth rates of the labor force, the efficiency of labor, and the depreciation of capital. This relationship reflects how savings in the economy are balanced against the needs for investment to accommodate growth and depreciation.

The Capital-Output Ratio Is Said to Be in Equilibrium