Part 2) Consider the capital accumulation equation: K+1 = I + (1 - 6) KĻ. This equation should hold for any t. For this question, assume that I, is a constant equal to its steady state value a) Argue that if capital is at steady state, then Ks = b) In the US, we saw that the capital stock is roughly 4 times GDP. Assume that Iss is a constant share s of steady state output, Yss. If depreciation is roughly 10% annually, what does this imply the savings rate s should be, approximately? Give a percentage.

Part 2) Consider the capital accumulation equation: K+1 = I + (1 - 6) KĻ. This equation should hold for any t. For this question, assume that I, is a constant equal to its steady state value a) Argue that if capital is at steady state, then Ks = b) In the US, we saw that the capital stock is roughly 4 times GDP. Assume that Iss is a constant share s of steady state output, Yss. If depreciation is roughly 10% annually, what does this imply the savings rate s should be, approximately? Give a percentage.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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