If an economy initially starts away from the steady state ________.
A)output will gradually fall over time
B)the economy will converge to the steady state in the long-run
C)consumption spending must be greater than investment spending
D)consumption spending must rise

Question

Quizplus · Accepted Answer

The economy will converge to the steady state in the long-run. This is because the forces of investment and depreciation will eventually lead to the economy reaching its steady state level of capital and output.

If an Economy Initially Starts Away from the Steady State