The long run equilibrium level of national income is the level at which ?
Correct answer: D. All investment is used to maintain the existing capital stock at its current level
- A. economic growth is Zero
- B. All investment is used in the manufacturing sector
- C. Economic growth is growing
- D. All investment is used to maintain the existing capital stock at its current level
Explanation
In a steady-state or long-run equilibrium, gross investment is just sufficient to replace depreciation and maintain the existing capital stock. There is therefore no net addition to capital, although output may remain at its equilibrium level.
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