Question

12. LO 5 Let Kt denote the quantity of capital a country has at the beginning of period t. Also, suppose that capital depreciates at a constant rate d, so that dKt of the capital stock wears out during period t. If investment during period t is denoted by It, and the country does not trade with the rest of the world (the current account surplus is always zero), then we can say that the quantity of capital at the beginning of period t +1 is given by Kt+1 = (1 - d) Kt + It

Answer 1

... .............................. 7 of Income Aggregate savings/ Insertorent in the economy Si E IZ = SYE SE CO,1') Let Depreciation rate be s E Co., 1 ] So, the Capital Accumulation equation in this economy ....... kth? It + (1-5) Kt s syut Cl-Skt Capital Oation Keith - SE (NE, Kt) + (-5) Kt. O Accumu E k long Labour stock increases due to population growth I Neste= (1+m) Ne - © Ubira CRS popesta , ,8t - F(", К) = F*) ul.. a Nt. capita. per f (kt) CS Scarried-with-... per capitation dan en capiteren CamScanner Capital labo productie

Notes Nt. yt = F(Nt, kt) f (Rt) FINE, Kt) - Ne. if (tt) of - FN (N+, K+) = Ne. f'(RE) [N(0) KT ON ***2K z f'(Rt) 6-R4)+F(Rt) TMP N = f(kt) k t f (kt) / Similarly, ........... of elm Pk & Fx ( Nt, kt) = f'(kt) We.con derive the following pecoperties of per capita .pecoduction functions i f(0) = 0 - capital is an essential input of ..............pewo. duction cis fck) >0 & F"(6) <0 - Diminishing marginal ......... Pecoduct of capital o this to f'(k): 20 kt fCk0 h Inada Conditions - ke akt SF. (Nd., Kt) + (1-5). K+ ..( An-Ne :)+(-8Rt Kt+L Net Ren Sf(Re)+(-6) 2 : MG (R) ) "Scanner CamScalcune (In)