If we define the saving rate as
,output as
,and the depreciation rate as
,and if
,the economy is:
A)contracting.
B)growing.
C)at the steady state.
D)in its short-run equilibrium.
E)none of the above

Question

If we define the saving rate as 
,output as 
,and the depreciation rate as 
,and if 
,the economy is:
A)contracting. 
B)growing. 
C)at the steady state. 
D)in its short-run equilibrium. 
E)none of the above

Quizplus · Accepted Answer

The steady state occurs when the economy is in long-run equilibrium. In a steady state, the economy experiences no growth or contraction. Given the information provided, we can assume that the investment rate is equal to the depreciation rate, meaning that the capital stock is not increasing or decreasing. Therefore, the economy is in its steady state.

If We Define the Saving Rate as