The Golden Rule level of capital accumulation is the steady state with the highest level of:

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BlackTom AI · Accepted Answer

To begin, let's consider what the Golden Rule level of capital accumulation aims to optimize in a steady state. The guiding objective is to maximize consumption per worker in the long run, given the constraints of the model.
Option 1: 'capital per worker.' While the Golden Rule does determine a level of capital per worker k*, this is not the quantity that is maximized in the objective. The steady-state capital level is a means to achieve higher consumption, not the end goal itself.
Option 2: 'consumption per worker.' This is the quantity that the Golden Rule seeks to maximize. In the steady state, the Golden Rule selects the capital stock so that the difference between output per worker and replaced depreciation (and other required uses of output) leaves the largest possible amount for consumption per worker. This is the central idea: maximize c = f(k) − (δ + n)k (in a simple model) or the equivalent expression in the given framework.
Option 3: 'savings per worker.' While savings per worker affects the evolution toward the steady state, the Golden Rule specifically targets maximizing consumption, not maximizing savings directly. High savings can reduce current consumption, so this is not the objective.
Option 4: 'output per worker.' Output per worker often rises with capital, but maximizing output does not necessarily maximize consumption per worker in the steady state, because more output can be consumed or saved, and the optimal balance for consumption occurs at a particular level of capital that may not coincide with maximum output alone.
Therefore, the nuanced distinction is that the Golden Rule is about choosing the steady-state capital to yield the highest possible consumption per worker, rather than simply maximizing capital per worker, savings, or output in isolation.

ECN 101 B01-B04 FQ 2025 Homework 2 due October 17

The Golden Rule level of capital accumulation is the steady state with the highest level of:

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