Suppose the following situation exists for an economy: Kt+1 / N = Kt / N.Given this information,we know with certainty that
A)the economy is operating at the golden rule equilibrium in period t.
B)saving per worker is less than depreciation per worker in period t.
C)saving per worker is greater than depreciation per worker in period t.
D)investment per worker equals depreciation per worker in period t.

Question

Quizplus · Accepted Answer

The given equation shows the relationship between the capital stock per worker at time t+1 and time t, assuming constant population growth. Since there is no mention of consumption, we can infer that all output is either invested or used to replace worn-out capital (depreciation). Thus, investment per worker in period t is equal to the difference in capital per worker between periods t+1 and t, which is equal to depreciation per worker. Therefore, option D is correct. The information provided does not allow us to determine whether the economy is operating at the golden rule equilibrium, and we cannot infer anything about savings relative to depreciation.

Suppose the Following Situation Exists for an Economy: Kt+1