A country’s production function works like this each year:…
A country’s production function works like this each year: Y = 4K0.5 It rents capital from the rest of the world at a cost of r per unit of capital per year. Fortunately for us, capital doesn’t depreciate in this country, and since firms are profit maximizing, then MPK=r. The marginal benefit of a unit of capital is the MPK and the marginal cost of a unit of capital is r. If the rental rate of capital is 0.1 (or 10% per year), how much capital will it rent this year, if firms in this country are profit-maximizers?
Read DetailsNation W has the same steady-state capital-output ratio as t…
Nation W has the same steady-state capital-output ratio as the modern United States. In Nation W, the savings rate is 15%, the annual depreciation rate is 1%, and productivity never grows (z=0%). What ‘s the annual population growth rate in Nation W?
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