Question

1. What would happen to capital per worker if we invested our savings in fast depreciating robots instead of slower depreciating traditional productive capital? (Please make the (unrealistic?) assumption that per dollar robots have the same effect on production as traditional capital.) [2 or 3 sentences if fine.]

Answer 1

if we invested our savings in fast depreciating robots instead of slower depreciating traditional productive capital we would be dealing with a case where there is a higher depreciation rate. This implies a higher break-even investment curve and because now depreciation exceeds investment, we expect the capital stock in its steady state to fall till the economy reaches a new but smaller value of steady state. Hence the capital per worker would be relatively smaller.