In the Solow model, if, in the absence of any shocks, the capital stock remains at K* forever, this rest point is called the:
A) saving rate
B) short-run equilibrium
C) steady state
D) the rate of capital accumulation
E) dynamic system

Question

Quizplus · Accepted Answer

The steady state in the Solow model is the rest point where the capital stock remains constant over time in the absence of any shocks. It is called the steady state because in this state, the economy is not growing or shrinking, but is rather in a balanced growth path. Choosing options A, B, D or E would be incorrect as they do not accurately describe the concept of a steady state in the Solow model.

In the Solow Model, If, in the Absence of Any