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[Capital demand & Investment] . Suppose the product function of an economy is given by Y = 200 + 70K - 0.5K2. Calculate the desired
[Capital demand & Investment]. Suppose the product function of an economy is given by Y = 200 + 70K - 0.5K2. Calculate the desired investment for the economy with current capital stock K= 40, assuming that (i) the real interest rate is 3% per year, (ii) the depreciation rate of capital is 7% per year, (iii) the price of a unit of capital is $400, and (iv) each unit of the output sells for $2. (Please note that dY/dK = MPK = 70 - K).
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