A steady state may be defined as

Question

Quizplus · Accepted Answer

A steady state is a condition in which the capital stock per worker stays constant over time. This means that investment per capita equals depreciation and the economy is not growing nor shrinking in the long run. Therefore, the choice that defines a steady state in terms of capital stock stabilization (B) is the best answer. The other choices may or may not be present in a steady state, but they do not capture the essence of what a steady state is. For example, an economy without short run fluctuations in GDP (C) could be in a recession, expansion or steady state, and an equilibrium between supply and demand for consumer goods (A) could happen in a disequilibrium, depending on the price level. Therefore, it is important to understand that a steady state is a dynamic concept that refers to the long-run equilibrium of an economy with respect to its capital stock.

A Steady State May Be Defined as