Answer to Question #166530 in Macroeconomics for gaurav sharma

Question

Derive the conditions for steady state growth in the Solow model. What are its implications? In what respects is the golden rule different from the steady state? 

Answer 1

Derive the conditions for steady state growth in the Solow model. What are its implications? 

In Solow model (and others), the equilibrium growth path is a steady state in which “level variables” such as K and Y grow at constant rates and the ratios among key variables are stable.

In what respects is the golden rule different from the steady state? 

The difference between the two lines is consumption; the golden rule capital stock is the k that maximizes consumption. Mathematically, this is where the slope of the production function (MPK) is equal to the slope of the depreciation line (δ). at steady state.