Question

Suppose that the economy is summarized by the following:

Production- Yt=10Kt^0.3Lt^0.7

Consumption- Ct= 0.8Yt

Depreciation rate 10%

MPK= 3Kt^-0.7Lt ^0.7 or in capita terms MPK= 3kt ^-.7

- Find the per capita actual investment function and plot it on a
graph with
*k*on the horizontal axis._{t}

Answer #1

The actual investment per capita is :

In this case, Therefore, c=0.8. Then the actual investment per capita is

The production function is

In per capita term

Then the actual investment in terms of per capita capital is

The figure below gives the actual investment.

Suppose that the economy is summarized by the following:
Production- Yt=10Kt^0.3Lt^0.7 Consumption- Ct= 0.8Yt Depreciation
rate 10% MPK= 3Kt^-0.7Lt ^0.7 or in capita terms MPK= 3kt ^-.7
Find the steady state (long run) equilibrium values of
it, kt, yt, ct and
st for the economy.

Production Function: Yt = 10Kt^0.4 Lt^0.6 Consumption Function:
Ct = 0.7Yt Depreciation rate: 10% (i.e. δ= 0.1) Population growth
rate: 3% (i.e. n= 0.03) With this production function, it can be
shown that MPK= 4Kt^-0.6Lt^0.6 = 4kt^-0.6 and MPL= 6Kt^0.4 Lt^-0.4=
7k^t0.4
What kind of policies would an economist recommend in order to
reach the golden rule capital stock? (Hint: think about saving
rate)

Consider a small open economy given by the
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Investment Function: It = 24 -100rt
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Net Exports Schedule: NXt = 8 – 4et
Government Spending: G0 = 36
Tax Collections: T0 = 36
World Interest Rate: r0 = 0.15
Price Level: P0 = 4
Domestic Money Supply: M0 = 2520
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Population Growth rate: n= .02
Technological growth rate: g= .01
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Suppose that output (Y ) in an economy is given by the following
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Et = Ct +
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Ct = C0 +
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It = I0 − δit,
I0> 0, δ > 0 (Investment)
Lt = kYt − hit, h, k
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