If an economy with no population growth or technological change has a steady-state MPK of 0.1, a depreciation rate of 0.1, and a saving rate of 0.2, then the steady-state capital stock:

Question

Quizplus · Accepted Answer

The Golden Rule level of capital is where the marginal product of capital (MPK) equals the depreciation rate. Here, MPK = 0.1 and depreciation rate = 0.1, so the economy is at the Golden Rule level. However, since the saving rate is 0.2, which is less than the MPK, the steady-state capital stock is greater than the Golden Rule level.

If an Economy with No Population Growth or Technological Change