Suppose the marginal product of capital is MPK=2-0.001K, the capital stock depreciates at 20% rate, the tax rate on revenues is 20% and price of capital is assumned to be 1. Furthermore, the economy has full- employment level of output of 5000, government purchases are 1000. Desired consumption is given by C^d=3000- 2000r+0.1Y, where Y is output and r is expected real interest rate. Initial level of capital is 100O. Refer to Scenario 2. What is goods market clearing real interest rate? A)r=13.84 B)r=15% C)r=2% D)r=16%

Suppose the marginal product of capital is MPK=2-0.001K, the capital stock depreciates at 20% rate, the tax rate on revenues is 20% and price of capital is assumned to be 1. Furthermore, the economy has full- employment level of output of 5000, government purchases are 1000. Desired consumption is given by C^d=3000- 2000r+0.1Y, where Y is output and r is expected real interest rate. Initial level of capital is 100O. Refer to Scenario 2. What is goods market clearing real interest rate? A)r=13.84 B)r=15% C)r=2% D)r=16%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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