What a policy maker choose a steady stock with more capital most in the golden rule steady stock with less capital that in the golden rule steady stock explain your answer?

Answer 1

A policy maker might choose a steady stock with more capital in the golden rule steady state because it typically leads to higher consumption per capita in the long run. In the golden rule steady state, the marginal product of capital equals the depreciation rate plus population growth, maximizing utility over time. Opting for a higher capital stock allows for increased output and, consequently, greater resources available for consumption, enhancing overall economic welfare. Conversely, a steady stock with less capital may result in lower long-term consumption levels and reduced economic growth potential.