Consider a country with production function , where y = 5k1/2, where y is the output per worker and k is capital per worker. Suppose the investment in capital occurs at a rate of 35% of income per worker every period, depreciation rate is 1.5% and population growth rate is 2%. Use excel to plot the production function, investment line and capital depletion line with k on the x-axis (use the attached spread sheet to draw your graphs). -attached spreadsheet shown below***** a. What is the steady state level of y and k. b. Suppose TFP increases by 20%. What happens to the steady state y and k? c. Suppose the investment rate increases to 40%. What happens to the steady state y and k

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Consider a country with production function , where y = 5k1/2, where y is the output per worker and k is capital per worker.

Suppose the investment in capital occurs at a rate of 35% of income per worker every period, depreciation rate is 1.5% and population growth rate is 2%.

Use excel to plot the production function, investment line and capital depletion line with k on the x-axis

(use the attached spread sheet to draw your graphs). -attached spreadsheet shown below*****

a. What is the steady state level of y and k.

b. Suppose TFP increases by 20%. What happens to the steady state y and k?

c. Suppose the investment rate increases to 40%. What happens to the steady state y and k

 

 

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