In the above economy, state an equation that relates the level of investment and the amount of depreciation that must hold in a steady state. Draw a curve that relates depreciation and investment as a function of the capital stock. Draw the steady state capital stock, and calculate its level. Show graphically in the above economy the effect of an increase in the savings rat on the level of capital per worker in the steady state. Consider an economy with no population growth and no technological progress. The level of the labor force is 1. The initial level of the capital stock is also 1, k = 1. 0 a 1-a The savings rate is 20%. The production function is Cobb-Douglas, Y = KªL¹ª, with a .5. The rate of depreciation is 10%. What is the level of the capital stock in period 2? In period 3? Will capital continue to rise forever? Why or why not?

In the above economy, state an equation that relates the level of investment and the amount of depreciation that must hold in a steady state. Draw a curve that relates depreciation and investment as a function of the capital stock. Draw the steady state capital stock, and calculate its level. Show graphically in the above economy the effect of an increase in the savings rat on the level of capital per worker in the steady state. Consider an economy with no population growth and no technological progress. The level of the labor force is 1. The initial level of the capital stock is also 1, k = 1. 0 a 1-a The savings rate is 20%. The production function is Cobb-Douglas, Y = KªL¹ª, with a .5. The rate of depreciation is 10%. What is the level of the capital stock in period 2? In period 3? Will capital continue to rise forever? Why or why not?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 11SCQ: Would you expect capital deepening to result in diminished1etmns? Why or why not? Would you expect...

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