1) Consider an AK model of endogenous growth. If the aggregate production function is given by Y=1.5K and the depreciation rate is 17.5%: a. What is the minimum savings rate such that this economy will experience growth in the long run? b. Discuss the pros and cons of pushing a high saving rate in this economy.

1) Consider an AK model of endogenous growth. If the aggregate production function is given by Y=1.5K and the depreciation rate is 17.5%: a. What is the minimum savings rate such that this economy will experience growth in the long run? b. Discuss the pros and cons of pushing a high saving rate in this economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1) Consider an AK model of endogenous growth. If the aggregate production function is
given by Y=1.5K and the depreciation rate is 17.5%:
a. What is the minimum savings rate such that this economy will experience growth
in the long run?
b. Discuss the pros and cons of pushing a high saving rate in this economy.

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