Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output...
Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output is 4, the growth rate of output is 3 percent, and the useful life of capital is 20 years.
'A' is a technology constant that contributes to GDP (Y). A = 1
a) What is the marginal product of capital in this situation?
b) If the economy is in a steady state, what must be the saving rate?
c) If the economy decides to achieve the Golden Rule level of capital and actually reaches it, what will be the marginal product of capital?
d) What must the saving rate be to achieve the Golden Rule level of capital?
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Assume that a country's production function is Y = AK0.3L0.7.
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ratio is 5. Suppose that the production function is Cobb–Douglas
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the Cobb–Douglas production function, see Chapter 3.)
c. Suppose that public policy alters the saving rate so
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