c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state (MPK gold)? MPK gold d. What will the capital-output ratio be at the Golden Rule steady state (gold)? K* Y gold = = Sgold = e. e. What must the saving rate be to reach the Golden Rule steady state (Sgold)? AP %
c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state (MPK gold)? MPK gold d. What will the capital-output ratio be at the Golden Rule steady state (gold)? K* Y gold = = Sgold = e. e. What must the saving rate be to reach the Golden Rule steady state (Sgold)? AP %
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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PLEASE WRITE ANSWERS CLEARLY AND NEATLY.
Transcribed Image Text:Population Growth and Technological Progress – Work It Out
In the nation of Winknam, the capital share of GDP is 35 percent, the average growth in output is 3.0 percent per year, the
depreciation rate is 5.5 percent per year, and the capital-output ratio is 3.0. Suppose that the production function is Cobb-
Douglas and that Winknam has been in a steady state.
Round answers to two places after the decimal when necessary.
c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the
marginal product of capital be at the Golden Rule steady state (MPKola)?
MPK
gold
d. What will the capital-output ratio be at the Golden Rule steady state ( gold
K*
Y gold
e. e. What must the saving rate be to reach the Golden Rule steady state (sgold)?
%
Sgold =
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