Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₂, capital accumulation is ________, the economy is ________, and consumption is ________. A) positive; growing; positive B) zero; in the steady state; zero C) negative; growing; positive D) zero; in the steady state; positive E) zero; contracting; negative

Question

Quizplus · Accepted Answer

At K₂, capital accumulation is zero because the economy is at a steady state, where investment equals depreciation, and thus, the economy is not growing or contracting. Consumption is positive because individuals still consume goods and services even when the economy is in a steady state.

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