Answer to Question #58374 in Macroeconomics for sthiti pragyan tripathy

Question

what is meant by golden role steady state? in what respect it is different from the steady state of solow? is the golden rule steady state a stable condition? expalin with help of diagram?

Answer 1

The Golden Rule savings rate is the rate of savings which maximizes steady state level or growth of consumption.
In the Solow growth model, a steady state savings rate of 100% implies that all income is going to investment capital for future production, implying a steady state consumption level of zero.