Consider an competitive economy with interest rate r =MPK=0.05, capital depreciation rate o = 0.03, technology growth rate g = 0.03, and population growth rate n = 0.02 (1) Why should we be interested in the Golden Rule steady state of an economy? (2) Is the economy depicted above running on its Golden Rule steady state? If yes, explain how you get your answer. If no, what should the government do to achieve the Golden rule steady state? (3) It is said that the Golden Rule steady state gives the greatest growth rate of consumption per capita. True or False? Explain your answer.
Consider an competitive economy with interest rate r =MPK=0.05,
capital
growth rate n = 0.02
(1) Why should we be interested in the Golden Rule steady state of an economy?
(2) Is the economy depicted above running on its Golden Rule steady state? If yes,
explain how you get your answer. If no, what should the government do to achieve
the Golden rule steady state?
(3) It is said that the Golden Rule steady state gives the greatest growth rate of
consumption per capita. True or False? Explain your answer.
(4) It is said that population is usually a burden to
reduce the population growth rate from n = 0.02 to n = 0.01, everyone will be better
off, in the sense of enjoying greater growth rate of consumption in the new Golden
Rule steady state. True or False? Explain your answer.
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