Consider a simplified RBC model. Production purely depends on the level of capital: Yt = F(Kt) = (1 + γ)Kt, where γ is a constant. There is no taxation (Yt = PrSt + Ct) and no government spending (Gt = 0). Assume that autonomous consumption is zero, so the consumption is proportional to output: Ct = b(Yt), where b is the marginal propensity to consume. Which of the following parameter specifications has to be true in order to have positive growth in the level of output?
Background info: (PrS=Private Savings, t=time) In the RBC model, private savings today at time (t) will drive capital tomorrow. If this does not sound familiar to you please do not try and answer it because you will get it wrong. please attach the steps in solving this
A. γ > 0.
B. (1 - b)(1 + γ) > δ.
C. b + δ + γ > 0.
D. (1 - b)γ > b.