Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In each case below please show your work and explain. The technocrats, the econometricians and the engineers in Thriftland have determinedthat the country's production function

In each case below please show your work and explain.

The technocrats, the econometricians and the engineers in Thriftland have determinedthat the country's production function is given by:

Y = 2000K0.25L0.75

The depreciation rate is 4 per cent of per capita capital stock ( = 0.04) and the countryhas been growing at a healthy six percent per annum. There is no labor efficiency growth.It is also known that Thriftland asa whole saves 30 percent of its income. The country is in a steady state: its entiresavings are currently used for depreciation purposes only.

(a) Is this country saving "too much?"

(b) What is the current per capita consumption (i.e., consumption per worker) ofthis country?

(c) How can the government attempt to maximize per capita consumption of thiscountry? What should be the "Golden Rule" target savings rate?

(d) If this target savings rate is achieved, what would be the value of per capitaconsumption in this country?

(e) At Golden Rule steady state, is GDP higher or lower than before?

(f) Draw a graph to explain (a) through (e).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Business Law

Authors: Jeffrey F Beatty, Susan S Samuelson

3rd Edition

0324537123, 9780324537123

More Books

Students also viewed these Economics questions

Question

=+c) What are the RRRs? Based on the RRRs, what action is best?

Answered: 1 week ago

Question

1. I try to create an image of the message

Answered: 1 week ago

Question

4. What is the goal of the others in the network?

Answered: 1 week ago