Question

if gdp is $500, the capital stock is $150, the savings rate is 20% and the rate of capital depreciation is 10%, by how m...

if gdp is $500, the capital stock is $150, the savings rate is 20% and the rate of capital depreciation is 10%, by how much will the capital stock expand next period? do you expect output to rise or fall?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Saving rate is 20% which means $100 will be saved. This will be invested so that capital stock increases by $100 to reach $250. however capital will depreciate by 10% of its original value which is $15. Thus capital stock will decrease by $15 and the final capital stock will be $235

This indicates that net investment will be $85 which will increase the output next period. Hence output will increase by $85 next period.

Add a comment
Know the answer?
Add Answer to:
if gdp is $500, the capital stock is $150, the savings rate is 20% and the rate of capital depreciation is 10%, by how m...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Question 20: A country has a 2008 growth rate of 4.2% and a 2007 GDP of...

    Question 20: A country has a 2008 growth rate of 4.2% and a 2007 GDP of $8,222 (in billions). What was the GDP in 2008? Question 31: If a country's initial real GDP is $10,000 and its yearly growth rate of GDP is 3.5%, use the Rule of 70 to determine approximately how many years it would take for this economy to double its GDP. A) 24.5 years B) 7 years C) 4.5 years D) 20 years Question 38: Consider...

  • 1. The savings rate in a country is 25%. The government wants to expand GDP by...

    1. The savings rate in a country is 25%. The government wants to expand GDP by $300 Billion. How much must they increase Government spending to reach that goal?

  • Find the steady state level of capital for this economy. please help with D. Exercise 1...

    Find the steady state level of capital for this economy. please help with D. Exercise 1 (50 Points]: The Solow Growth Model Consider an economy where there are 1,354 agents, each of them having one unit of available time to labor. There is no government. There is a representative firm that has a Cobb-Douglas production technology that creates output (or income) following the form of Y = 2KN- The depreciation rate is 4.9%, the population of agents grows at 1.2%...

  • 20. If a country's depreciation rate increased from 2 percent to 5 percent of physical capital and it was operating...

    20. If a country's depreciation rate increased from 2 percent to 5 percent of physical capital and it was operating at its steady-state before the change, we would expect to see which of the following? I. a decrease in the steady-state per capita capital stock II. a decrease in the steady-state level of real GDP per capita III. a corresponding decrease in real population growth rate IV. an increase in capital stock A) All the above are correct. B) I,...

  • Let Y=10 * sqrt(K) * sqrt(L) Suppose households save 10% of all output. This savings is...

    Let Y=10 * sqrt(K) * sqrt(L) Suppose households save 10% of all output. This savings is added to the capital stock for the next period.  On the other hand, depreciation destroys 3% of capital in each period. Draw a graph depicting the steady state equilibrium.  (You should have per capita capital on the x axis and per capita investment on the y axis.) Solve for the equilibrium, giving values for y*, k*, i*, and c*. Suppose the savings rate were to increase...

  • The savings rate (s) is S and the depreciation rate (d) is D a) Calculate the level of output and capital in the st...

    The savings rate (s) is S and the depreciation rate (d) is D a) Calculate the level of output and capital in the steady state. b) Illustrate with a graph. c) Illustrate and explain what happens if the savings rate decrease. d) Illustrate and explain what happens if the depreciation rate decrease.. e) Illustrate and explain what happens if the the level of technology decreases..

  • EC2010-3 Q8. (a) Explain how the savings rate, the rate of depreciation, the rate of population...

    EC2010-3 Q8. (a) Explain how the savings rate, the rate of depreciation, the rate of population growth and the rate of technological progress affect the long-run growth rate of the economy. (40 marks) (b) Consider the scenario in which the population is constant and the rate of technological progress is zero. Explain the dynamic effects of a decline in the savings rate. (40 marks) (c) Explain the concept of human capital. (20 marks)

  • 4. Suppose an economy has capital share of half, a savings rate of 12%, depreciation rate...

    4. Suppose an economy has capital share of half, a savings rate of 12%, depreciation rate of 2%, population growing at 2% and labor-augmenting technological change of 2% yearly. a) What is the steady-state level of capital per efficiency unit of labor? b) Is this economy at the golden rule level of savings/investment? Fully detail your reasoning. c) If the economy decides to transition to Golden Rule, what will happen to consumption, capital per efficiency unit of labor and output...

  • 14. Suppose instead that T < G. Does the investment rate still equal the private savings...

    14. Suppose instead that T < G. Does the investment rate still equal the private savings rate? If the savings Tate is 20% and the deficit is 5% of GDP, what in the investment rate? A. 25% B. 20% C. 15% D. 10% 15. Suppose capital per worker increases from 2 to 3. We know that this increase will cause what to happen to output per worker in the same period? A. output per worker to increase. B. output per...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT