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?
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World Economic And Social Survey 2012 In Search Of New Development Finance
Authors: United Nations Department Of Economic And Social Affairs
1st Edition
9210555112, 9789210555111
