Question

20. If the capital stock is ABOVE the Golden Rule level, an increase in the capital stock would

A raise output less than depreciation B raise output more than depreciation

21. If the capital stock is ABOVE the Golden Rule level, an increase in the capital stock would

A cause consumption to fall B cause consumption to rise

22. At the Golden Rule level of capital,

A the marginal product of capital per worker equals the depreciation rate

B the marginal product of capital per worker net of depreciation equals zero

C both A and B

23. If the saving rate were lowered, steady-state consumption might

A fall B rise C either A or B

24. If the saving rate were raised, steady-state consumption might

A fall B rise C either A or B

Answer 1

20). The correct option is (B).

raises output more than depreciation.

21). The correct option is (b).

cause consumption to rise.

We know that, If the capital stock is above the Golden Rule level, an increase in the capital stock would cause consumprion to rise.  When the economy begins above the Golden Rule level of capital, reaching the Golden Rule level leads to higher consumption at all points in time.

22). The correct option is (a).

A the marginal product of capital per worker equals the depreciation rate

The Golden Rule capital stock is the level at which MPK = δ, so that the marginal product of capital equals the depreciation rate.  

23). The correct option is (b).

Rise.

steady-state consumption per worker would be higher in a steady state with a lower saving rate.

24). The correct option is (a).

Fall.

steady-state consumption per worker would be lower in a steady state with a higher saving rate.

Hope you got the answer.

kindly comment for any sort of clerification.

Thanks!