Answer :
Final answer:
The Golden Rule Quantity of capital per worker is the optimal level of the capital-to-labor ratio that maximizes steady-state output per worker. A higher capital per worker generally leads to higher output per worker, and the Golden Rule ensures that production and consumption are balanced in a way that maximizes economic well-being in the long term hence, answer is b) The Golden Rule states that the optimal quantity of capital per worker maximizes steady-state output per worker.
Explanation:
The Golden Rule Quantity of capital per worker refers to the optimal level of the capital-to-labor ratio that maximizes steady-state output per worker. This concept is central to the Solow growth model, which analyses long-term economic growth. The correct statement that describes the Golden Rule is:
The optimal quantity of capital per worker maximizes steady-state output per worker.
It is important to understand that:
- A higher quantity of capital per worker generally leads to a higher level of output per worker.
- Quantity of capital per worker has a significant impact on output per worker; it is not correct to say it has no impact.
- Lowering the quantity of capital per worker does not increase output per worker; rather, it typically leads to a decrease in output per worker.
The Golden Rule level is found where the additional output from an extra unit of capital equals the loss in consumption from saving that extra unit of capital, thus balancing additional production with consumption in a way that maximizes economic well-being at the steady state.
