Economics question

[Zander1983]

I need the answer QUICK Karma will be given...

If the rate of savings exceeds the rate recommended by the "Golden Rule" then:
a) the economy will not reach a steady state
b) long-run consumption will fall below its Golden Rule level
c) the economy will experience sustained long-run growth
d) the rate of depreciation will increase

Thanks!

 

[primetime21]

e) I don't know.

 

[revexrevex]

if the golden rule is some kind of stability input point then i pick E

 

[Zander1983]

I ended up saying b)

I only asked because I know there are quite a few economics/finance people around here...

It was a timed online test that only counted towards a small % of my assessment, so it wasn't a big deal.

I've got a bit behind though, so its a nice wake-up call

 

[Zander1983]

if the golden rule is some kind of stability input point then i pick E

The golden rule implies that steady state consumption is maximised when:

marginal product of capital = alpha * output / capital = steady state consumption

investment = beta * output = steady state consumption * capital = depreciation

beta * output / capital = steady state consumption

 

[slickdadd]

If the savings rate exceeds the investment requiement, which I think is the same thing as the "Golden Rule," then there will be an accumulation of capital and therefor output/consumption/income will increase in the short run until they reach a new steady state. None of those were in the answers so I'm not totally sure. The closest one was c, but it said long run and not short run.

 

[ZKaudio]

could also be d... don't wanna do much thinking at this hour.

 

[MarthaStewart]

Anytime you have some homework (regardless of the subject) or take home tests, whether in summer school or throughout the school year - definitely always post it up on a fitness discussion board.