if the capital stock per worker is 8, the saving rate (s) is 12, the capital...
if the capital stock per worker is 8, the saving rate (s) is 12, the capital share (α) is 13 and the depreciation rate (δ) is 18 , then:
a. the capital stock per worker will grow towards the steady state
b. the capital stock per worker will shrink towards the steady state
c. none
d. investment per worker in the economy is larger than depreciation per worker
e. the economy is not in the steady state yet
Homework Answers
Option B is correct
Steady state capital per worker = (s/d)^(1/(1-a))
= (0.12/0.18)^(1/(1-0.13))
= 0.63
Since the current value of capital per worker is 8 and steady state value is 0.63, the capital stock per worker will shrink towards the steady state
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