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Consider an economy whose production function is Y6) = K(t) Consider an economy whose production function is Y (t) = K , K (t) =

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Consider an economy whose production function is Y6) = K(t)\

Consider an economy whose production function is Y (t) = K , K (t) = sY(t) K(t) (Notice there is a dot above the K). Show that if there are increasing marginal returns, that is a>l, then there are two possible futures for the economy depending on whether the initial capital K (0) is greater or less than a threshold. Estimate the value of that threshold.

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