You are given the following information about an economy. Y = C + I Y = F(K, L) The aggregate production function for this economy exhibits constant returns to scale and the marginal products of labor and capital are both subject to diminishing returns. s = saving rate (assume this is constant) per year δ= depreciation rate (assume this is a constant) per year y = Y/L k = K/L k* = steady state of capital per worker (K/L) and sf(k) < δk. i. What is sf(k) ii. What is δk? iii. Interpret the meaning of sf(k) < δk?
You are given the following information about an economy. Y = C + I Y = F(K, L) The aggregate production function for this economy exhibits constant returns to scale and the marginal products of labor and capital are both subject to diminishing returns. s = saving rate (assume this is constant) per year δ= depreciation rate (assume this is a constant) per year y = Y/L k = K/L k* = steady state of capital per worker (K/L) and sf(k) < δk. i. What is sf(k) ii. What is δk? iii. Interpret the meaning of sf(k) < δk?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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c. You are given the following information about an economy.
Y = C + I
Y = F(K, L)
The aggregate production function for this economy exhibits constant returns to scale and the marginal products of labor and capital are both subject to diminishing returns.
s = saving rate (assume this is constant) per year
δ=
y = Y/L
k = K/L
k* = steady state of capital per worker (K/L) and sf(k) < δk.
i. What is sf(k)
ii. What is δk?
iii. Interpret the meaning of sf(k) < δk?
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