3. You are given the desired capital stock as:OYKrcwhere: 0=0.4Y = RM8 billionrc = 0.15Based on the information given above:i)Calculate the desired capital stock.ii)Assume output (Y) is expected to increase by RM2 billion. Explain how this increaseaffect the desired capital stock.Assume that the capital stock is at the desired level before the change in income wasexpected. Assume also the speed of adjustment (A) is given as 0.4 in the gradualadjustment of investment. Calculate the rate of investment as well as the new capitalstock when there is an increase in the expected income.

The desired capital stock refers to the number of capital goods the company would like to have to…

3. You are given the desired capital stock as: OY K rc where: 0=0.4 Y = RM8 billion rc = 0.15 Based on the information given above: i) Calculate the desired capital stock. ii) Assume output (Y) is expected to increase by RM2 billion. Explain how this increase affect the desired capital stock.

3. You are given the desired capital stock as: OY K rc where: 0=0.4 Y = RM8 billion rc = 0.15 Based on the information given above: i) Calculate the desired capital stock. ii) Assume output (Y) is expected to increase by RM2 billion. Explain how this increase affect the desired capital stock.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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