Compute the per worker form of the production function above

Assignment Help Corporate Finance
Reference no: EM13982268

Country A and country B both have the production function: 

Y = F(K, L) = K1/2 L 1/2.
Assume that in both countries capital depreciates at a rate of 10% each year. (Assume no population growth and no technological progress in either country.) Assume further that country A saves a constant 20 percent of its income each year and that country B saves 30 percent.

a) Compute the per-worker form of the production function above. 

b) Using this and the steady-state condition, compute the steady-state level of capital per worker for each country. 

c) Now compute the steady state level of consumption per worker in each country. Since the golden rule is defined as the level of capital that allows the greatest level of consumption in steady state, which of these two countries has a steady state closer to the golden rule steady state? Why does a smaller marginal propensity to consume here result in a higher steady state level of consumption? 

d) Check your conclusion above by computing the golden rule level of capital stock, and the saving rate necessary to achieve it.

Reference no: EM13982268

Questions Cloud

The unequal distribution of the benefits produced : Trace the problems inherent in the unequal distribution of the benefits produced by the American economic system. Focus on the efforts of labor to change that inequality and on capital to retain its favored position. Describe evidence of inequality a..
Do you expect to see fusion of uranium atoms in a star : Stars fuse lighter nuclei to form heavier nuclei (to the extent that they are capable and the fusion process is energetically favorable). Based on the plot of binding energy per nucleon, do you expect to see fusion of uranium atoms in a star? Why..
The standard operation time for one particular operation : Production for a product is planned at 5,000 units per week. The standard operation time for one particular operation is 2.45 minutes. The facility operates 40 hours per week. Suppose that there was a fallout of 10% in the operation that proceeds thi..
What result should he get : Starship "Alpha" is traveling at 0.8c (α = 5/3) with respect to the identical starship "Beta." Each starship has rest length 10,000 m. The ship's engineer aboard the "Beta" measures the length of the "Alpha" as it passes by his window. What result..
Compute the per worker form of the production function above : Check your conclusion above by computing the golden rule level of capital stock, and the saving rate necessary to achieve it.
What noteworthy similarities or differences can identified : Compare and contrast the scopes of practice in the licensure laws of licenses professional counselors and licensed clinical social workers in New York state. What noteworthy similarities or differences can be identified
Federal reserve decides to stabilize the inflation rate : Suppose the current administration decides to decrease government expenditures as a means to cut the existing government budget deficit. Using a graph of aggregate demand and supply, show what the effect would be in the short run. Describe the effect..
Contains details in respect of length : Certificate of measurement contains details in respect of length,breadth and height of the packages,size of packing,Is true or False?
State of economy than level of output and inflation rate : Think about all the economic data that are reported in the news every day. The information from all of them may be relevant, but does a policymaker really need to know any more about the state of the economy than the level of output and the inflation..

Reviews

Write a Review

Corporate Finance Questions & Answers

  What will be biggest obstacle in efforts to achieve goals

Determine two goals (one short term and one long term) that you wish to achieve(you can make up fictional ones if you have privacy concerns). Explain how you will achieve them and what length of time you estimate it will take for you to do so.

  You are the senior financial analyst at a mid-sized

you are the senior financial analyst at a mid-sized manufacturing firm in the chicago area. your supervisor the vp of

  Multiple choice questions based on time value of

multiple choice questions based on time value of money.choose the correct answer from the given option. 1.nbspthe

  Calculate soundbytesenterprise value and ebitda multiple

Calculate Soundbytes' enterprise value and its EBITDA multiple.

  Computation of ice cream to be manufactured using the

computation of ice cream to be manufactured using the linear programming technique.the sweet treat shop sells ice cream

  Standard deviation for each security

What is a real option and how does it relate to capital budgeting and the objective of the firm and find the expected return and standard deviation for each security.

  Create the loan amortization schedule

Create the loan amortization schedule and create the depreciation schedule - create the schedule that combines interest expenses and depreciation expenses.

  1 a 75 percent-owned subsidiary should not be consolidated

1. a 75 percent-owned subsidiary should not be consolidated whena. its operations are dissimilar from those of the

  What is the probability distribution of s3

What is the value at t = 0 of the corridor options sold by Carblays and what is the probability that SocPart gets a payo from the options?

  Cost of equity based on the dividend growth model

What is the cost of equity based on the dividend growth model and what is the cost of equity based on the security market line?

  Problema arbitrage financial is offering an investment with

problema arbitrage financial is offering an investment with the following cash flowsyear1234cash flow200400-

  What holding period return will be earned on both

If an investor purchases the stock and the warrant when the stock price is $20, what holding period return will be earned on both, assuming that the stock and the warrant are sold when the stock price reaches $25?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd