If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock:

Question

Quizplus · Accepted Answer

In a steady-state economy with no population growth or technological change, the Golden Rule level of capital is achieved when the marginal product of capital (MPK) equals the depreciation rate. Since the steady-state MPK of 0.125 matches the depreciation rate of 0.1, this indicates the economy is at the Golden Rule level of capital, where net investment is zero, and the economy is in a state of optimal efficiency.

If an Economy with No Population Growth or Technological Change