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You observe the following facts about a fictional economy: The capitaloutput ratio is 3. The country uses 15% of GDP to replace depreciated capital. The average growth rate of the economy is 2.5 percent. The capital share of output is 35%. Assume that the economy is at a steady-state, and that its output is produced by a Cobb-Douglas production function. a) What is the rate of depreciation in this economy? b) What is the saving rate in this economy? c) What is the marginal product of capital in this economy? d) What is the GOLDEN RULE marginal product of capital in this economy? Compare to your answer to part c) and interpret (that means you should talk about what it means if they are not the same and what the economic implications are). e) Let us say this country changed its saving rate to arrive at the GOLDEN RULE steady state. What would be the new capital-output ratio at the GOLDEN RULE steady state? f) What is the saving rate required to reach the GOLDEN RULE steady state?
Considering a machine which will have an estimated service life of 10 years with a salvage value of 10% of the investment cost. Its expected saving from annual operating and m
Calculate the regression of income on grade-point average in the example described in this chapter and compare it with the regression of grade-point average on income. Why are
Kenyan economics expert James Shikwati says the aid to Africa does more harm than good. He is an avid proponent of globalization and argues that Western development policy in
Suppose your Zimbabwean bank account pays interest monthly with the interest rate quoted as an effective annual rate (EAR) of 50%. (a) What percent interest will you earn each
In early 2000s the demand for housing increased substantially as low interest rates increased the number of people who could afford homes. What was the likely effect of this o
Real consumption expenditures in the economy is $600, investment expenditure is $100, government expenditures of goods and services is $150, exports is $60, imports is $80, la
The quantity of pizzas demanded soared the following week from 1 pie an hour to 100 pies an hour. Illustrate what was price elasticity of demand for Domino's pizza.
Suppose that you are interested in studying the effect parental involvement has on children’s grades. You plan to measure parental involvement by asking the students a few sur
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