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Consider an economy whose output (GDP Y) is a function of capital (K) and can be represented by the production function Y = 13K0'78. This
Consider an economy whose output (GDP Y) is a function of capital (K) and can be represented by the production function Y = 13K0'78. This country has a capital depreciation rate of 15%, but has not yet decided on it's saving rate. It would like to choose the saving rate to maximize consumption, Where consumption is C' = Y I. A too high savings rate results in too much I, too little saving results in low K, which lowers Y. The optimla savings rate is the one that maximizes consumption. What is the savings rate that maximizes consumption in this economy. (Your answer should be reported in percentage points. For example if you think the optimal saving rate is 91% type in 91)
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