In the Solow model,if,in the absence of any shocks,the capital stock remains at K* forever,this rest point is called the __________.

Question

Quizplus · Accepted Answer

The steady state is the point of the Solow model where the capital stock remains constant at K* in the absence of any shocks. It represents the long-run equilibrium of the model, where the economy's output, consumption, and investment are constant at their steady-state values. The saving rate and the rate of capital accumulation are important determinants of the steady state, but they do not represent the rest point itself. The short-run equilibrium is a temporary state where the economy adjusts to changes in the saving rate or technology, but it does not represent a long-run rest point. Therefore, the correct answer is C, steady state.

In the Solow Model,if,in the Absence of Any Shocks,the Capital