Denote the quantity of capital country

Assignment Help Business Economics

Reference no: EM131162980

Let Kt denote the quantity of capital a country has at the beginning of period t. Also suppose that capital depreciates at a constant rate d, so that dKt of the capital stock wears out during period t. If investment during period t is denoted by It , and the country does not trade with the rest of the world (the current account surplus is always zero), then we can say that the quantity of capital at the beginning of period t + 1 is given by Kt+1 = (1 − d)Kt + It . Suppose at the beginning of year 0 that this country has 80 units of capital. Investment expenditures are 10 units in each of year 0, 1, 2, 3, 4, . . . , 10. The capital stock depreciates by 10% a year.

(a) Calculate the quantity of capital at the beginning of years 0, 1, 2, 3, 4, . . . , 10.

(b) Repeat the above, except assume now the country begins year 0 with 100 units of capital. Explain what happens now, and contrast with before.

Reference no: EM131162980

Questions Cloud

The benefits from international trade include : The benefits from international trade include

Marginal physical product diminishes as additional workers : Marginal physical product diminishes as additional workers are hired because

Union evaluates job offers based on the : A union evaluates job offers based on the

The poverty gap and an oligopsony exists : An oligopsony exists if. The poverty gap is the

Denote the quantity of capital country : Let Kt denote the quantity of capital a country has at the beginning of period t. Also suppose that capital depreciates at a constant rate d, so that dKt of the capital stock wears out during period t. Calculate the quantity of capital at the beginni..

Explain what the identity means : Consider the identity S p−I = CA+D where S p is private sector saving, I is investment, CA is the current account surplus, and D is the government deficit. Show the above identity holds. Explain what the above identity means.

Write down the budget line : Adam has $38 and he decides to spend on X1 and X2. Commodity one costs $5 per unit and commodity two costs $11 per unit. His utility function is U(X1,X2)= min(3X1,X2). Write down the budget line.

Suppose demand function for good-is this good ordinary : Suppose demand function for good 1 is X1=(2m)/(P1+2P2). Calculating relevant elasticities answer the following questions. Show your calculation. Is this good ordinary or Giffen? Is this good normal or inferior?

Corresponds to preferences for perfect substitutes : The utility function U(X1,X2)=X1^a + 2X2^b. Corresponds to preferences for perfect substitutes. All ordinary (non-Giffen) goods are also normal goods. (Hint: Use the Slutsky equation to support your answer). If consumer consumes only two goods, both ..

User Account

All Pages