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6+A+9N) KAN YJAN FIK/AN) sf(K/AN) C ヅ + KIAN Refer to the figure above. Suppose the economy is currently in steady state. Furthermore, suppose the current savings rate (the one depicted in the figure) is higher than the golden rule savings rate. Which of the following statements is correct?O To maximize steady state consumption per capita, the economy should aim for a steady state where capital per effective worker is equal to E O To maximize steady state consumption per capita, the economy should aim for a steady state where capital per effective worker is less than D O To maximize steady state consumption per capita, the economy should aim for a steady state where capital per effective worker is more than E To maximize steady state consumption per capita, the economy should aim for a steady state where capital per effective worker is equal to D To maximize steady state consumption per capita, the economy should aim for a steady state where capital per effective worker is more than D but less than EYİAN f(K/AN) sf(K/AN) K/AN Refer to the figure above. Suppose this economy is currently in steady state. Now, suppose that population growth slows down. That is, population grows at a slower rate than it was growing before. Which of the following statements must be correct?Once the economy reaches a new stead state, capital per effective worker will be more than E O Once the economy reaches a new stead state, capital per effective worker will equal D Once the economy reaches a new stead state, capital per effective worker will be more than D but less than E O Once the economy reaches a new stead state, capital per effective worker will equal E Once the economy reaches a new stead state, capital per effective worker will be less than D O More information is needed in order to know what capital per effective worker will be once the economy reaches a new steady state.

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Answer #1

Answer : 1) The answer is option a.

In the given diagram at point D the current savings rate f (K/AN) is greater than the golden rule savings rate sf (K/AN). So, based on given diagram the steady state per capita consumption become maximum when the economy reach at point E. Therefore, option a is correct.

2) The answer is option F.

Because here it is not given any imformation that at which point either at D or E the economy exists in steady state situation currently. Hence we can not say what will be the capital per effective worker when the economy reach at new steady state situation. Therefore, option F is correct.

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