(1) Y=√K , (2) the existing capital stock depreciates at a rate of 5% per year,...
(1) Y=√K , (2) the existing capital stock depreciates at a rate of 5% per year, and (3) the country saves 25% of all income. Assume the country has 100 units of capital. How much capital is needed to replace the units that are no longer functional?
Homework Answers
Given depreciation rate =0.05=5%. The country at present has K=100
Thus after one year the stock of capital will be reduced by 0.05*100=5 units of capital. Thus after one year 5 units of capital will not be functional.
Thus 5 units of capital will be needed to replace the units that are no longer functional
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(1) Y=√K , (2) the existing capital stock depreciates
at a rate of 5% per year,...
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