Answer to Question #294447 in Macroeconomics for Aakash patel

Question

What is meant by state in the solow model? Explain how golden rule is different from steady state.

Answer 1

Steady state - This is the key to understanding the solow model whereby at the steady state an investment is equal to depreciation.

Golden rule - This is the optimum saving rate that maximizes consumption per capita in the steady state when an investment is equal to depreciation.