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) rate of capital accumulation.
E) dynamic system.

Question

Quizplus · Accepted Answer

The steady state is the long-run equilibrium of the Solow model where the capital stock remains constant over time due to a balance between depreciation and investment. If the capital stock remains at K* forever, this indicates that the economy has reached its steady state.

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