Answer :
Final answer:
The steady-state level of capital per worker is smaller than the Golden Rule level.
Explanation:
In an economy, the steady-state level of capital per worker is determined by the interaction of the marginal product of capital (MPK), savings rate (s), and population growth rate (n). The equation that represents this relationship is MPK = s / (n + δ), where δ represents the depreciation rate of capital. If MPK = 0.5, and the savings rate (s) = 0.05 and the population growth rate (n) = 0.01, we can substitute these values into the equation to find the steady-state level of capital per worker.
For the Golden Rule level of capital per worker, we need to find the level that maximizes consumption in the long run. This occurs when the savings rate is equal to the growth rate of the economy, so s = n. However, in this case, s = 0.05 and n = 0.01, so the steady-state level of capital per worker is smaller than the Golden Rule level.
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