Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that the economywide expected future marginal product of capital is MPK=20-0.02K where K is the future capital stock. The depreciation rate of capital, d,
Suppose that the economywide expected future marginal product of capital is MPK=20-0.02K where K is the future capital stock. The depreciation rate of capital, d, is 20% per period. The current capital stock K0 is 800 units. The price of a unit of capital is 1. Firms pay taxes equal to 15% of their output. Government purchases are equal to 200, and full-employment output is 1,200. Suppose the real interest rate is 10% per period. What is the (closest) value of the desired capital stock?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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