Question
Suppose that the economy has the following production function: Y = AKL 1 where Y is the aggregate output; A is total factor productivity; K
Suppose that the economy has the following production function:
Y = AKL 1
where Y is the aggregate output; A is total factor productivity; K is capital; and L is labour.
The investment function is: (n+)k , where < 1 Let = 0.4. An economist suggests that the optimal savings rate must equal the capital share of income.
Do you agree with this? Why or why not?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Quantitative Methods For Business
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam
11th Edition
978-0324651812, 324651813, 978-0324651751
