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

The equilibrium growth path in the Solow model (and others) is a steady-state in which "level variables" such as K and Y increase at constant rates and critical variable ratios remain fixed.

Consumption is the distinction between the two lines; the golden rule capital stock is the k that optimizes consumption. This is where the slope of the production function (MPK) equals the slope of the depreciation line (in mathematics). at a constant state