Question: Why are the equations like this in a steady state?? I am getting confused Fig. 5.5 The long-run adjustment of capital stock per effective worker

Why are the equations like this in a steady state?? I am getting confused

Why are the equations like this in a steady state?? I am

Fig. 5.5 The long-run adjustment of capital stock per effective worker K K* f' ( k ) _8 1 + 14 The determination of k is illustrated in Fig. 5.5. You will notice that this is the same diagram as Fig. 5.1. The only difference is that we now have capital per effective worker on the horizontal axis. If the stock of capital per effective worker is low, the return to investment is high, and the capital stock per effective worker will increase towards the steady state level. If the stock of capital per effective worker is high, the return to investment is low, and the capital stock per effective worker will decrease. In the steady state we have K Y EN = k* and EN =f (k* ), or, alternatively, K* = k*EN and Y* =f (k*) EN

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