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Question 3: Capital. Imagine an economy with a stable population and a kind of funny production function (and no productivity growth). Y = 500 +
Question 3: Capital. Imagine an economy with a stable population and a kind of funny production function (and no productivity growth). Y = 500 + 0.5*K Saving rate = 0.15, Depreciation rate 6 = 0.1, At the start of period 1: K = 100 What will be the capital stock at the end of period two? (Tolerance +/ 10) ---- 2 Same ? ? This' 1s your as '3? answer! Question 4: Capital Steady State: In the previous problem, what is the long-run steadystate level of capital? (Tolerance +/- 10) Question 5: Capital Dynamics: Suppose K = $6,000. Y = $2,000. Savings rate 5 = 0.4. Depreciation rate = 0.2. How much is capital changing? (Tolerance +/ 10)
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