Refer to the following figure when answering the following questions. Figure 5.1: Solow Diagram -In Figure 5.1, the capital stock at K₁ is not the steady state because: A) the saving rate is too low. B) the saving rate is too high. C) the depreciation rate is too low. D) gross investment is higher than capital depreciation. E) gross investment is lower than capital depreciation.

Question

Quizplus · Accepted Answer

Gross investment is higher than capital depreciation, so the capital stock is increasing and not in steady state.

Refer to the Following Figure When Answering the Following Questions