Capital stock at the end of the year

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Reference no: EM138234

Q. The equation of capital accumulation is K' = K + I - δK, where K is the capital stock at the beginning of the year, I is the investment made during the year, δ is the depreciation rate, and K' is the capital stock at the end of the year/beginning of the next year.

a. IfK=100,δ=.1,andI=20,whatistheK'?

b. If K = 100, δ = .05, then for the capital stock at the end of the year of this economy to remain constant as the beginning of the year, how much investment is needed?

Reference no: EM138234

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