3. Assume that production function is Cobb-Douglas type, namely Yi = zika i N 1-ai (1) where i = 0, 1 indicates the two periods of the model. Derive the formula for the investment demand given the model parameters and other endogenous variables, like real wage and employment. Calculate al ad. How does the depreciation rate influence investment? Explain

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3. Assume that production function is
Cobb-Douglas type, namely Yi = zika i
N1-a i (1) where i = 0, 1 indicates the
two periods of the model. Derive the
formula for the investment demand
%3D
%3D
given the model parameters and other
endogenous variables, like real wage
and employment. Calculate al ad. How
does the depreciation rate influence
investment? Explain
Transcribed Image Text:3. Assume that production function is Cobb-Douglas type, namely Yi = zika i N1-a i (1) where i = 0, 1 indicates the two periods of the model. Derive the formula for the investment demand %3D %3D given the model parameters and other endogenous variables, like real wage and employment. Calculate al ad. How does the depreciation rate influence investment? Explain
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