Question
A country's output (Y) is given by = 2K^2/3 (A and eL are constant). The savings rate is = 0.2 and the rate of capital
A country's output (Y) is given by = 2K^2/3 (A and eL are constant). The savings rate is = 0.2 and the rate of capital depreciation is = 0.1.
a) plot Y as a function of K, allowing K (on the horizontal axis) to vary from 0 to 150
b)The current level of capital is = 125. Calculate the current corresponding level of Y, and indicate it on your graph. Also, calculate the current level of consumption (C) and saving (S). Is the level of capital (K) increasing or decreasing?
C) ) Identify the steady-state levels of K (K^SS) and Y (Y^SS), and indicate them on your graph.
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