If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate:

Question

Quizplus · Accepted Answer

In a steady state with no population growth or technological change and where the marginal product of capital is less than the depreciation rate, steady-state consumption per worker would be higher in a steady state with a lower saving rate. This is because a lower saving rate would result in higher consumption in the present, reducing the amount of capital available for investment and ultimately resulting in a lower steady-state capital stock. This lower capital stock would mean that each unit of capital would be used more efficiently, resulting in a higher marginal product of capital and therefore higher per-worker output and consumption.

If an Economy Is in a Steady State with No