What happens to the steady state real interest rate

Reference no: EM13242893

Suppose that the production function takes the form Y = AKa*L1-a, where a?= 1/3. Assume that the saving rate, s = 0.15 and the rate of depreciation d = 0.05 Further, let A = 1, and L = 2, initially.
a) Suppose that A doubles. What happens to the steady state real interest rate? What happens to steady state wage rate?
b)Suppose that the steady state stock of capital is 20. What saving rate guarantees that the economy will converge to this level of capital?

Reference no: EM13242893

Questions Cloud

Developing a proposal preparation plan : Analyze each of the key proposal preparation documents discussed in Osborne's "Developing a Proposal Preparation Plan" and recommend at least one additional document that would help you analyze customer requirements.

Explain what is the maximum work you can obtain : What is the maximum work you can obtain from 16.0 g of nickel in the following cell when the emf is 0.89 V? Ni(s) | Ni2+(aq) || Ag+(aq) | Ag(s)

Major branches of the muslim faith did the sultan belong to : Name the Kurdish muslim Sultan and general who was the archnemisis of king Richard I of England, better known as Richard the lion heart. Which of the major braches of the Muslim faith did the Sultan belong to?

Describe the mental model : Identify a mental model you hold about someone, a department, your organization, or even your customers (internal or external). With the perception in mind, proceed with the assignment.

What happens to the steady state real interest rate : Suppose that the production function takes the form Y = AKa*L1-a, where a?= 1/3. Assume that the saving rate, s = 0.15 and the rate of depreciation d = 0.05 Further, let A = 1, and L = 2, initially.

Explain the activity of a radioactive substance : You are using a Geiger counter to measure the activity of a radioactive substance over the course of several minutes. If the reading of 400. counts has diminished to 100. counts after 35.2 minutes, what is the half-life of this substance

Find what happens to real interest rate and the ca balance : Consider a two-country model. Assume that the Current Account Balance is initially positive for one country. Assume that a permanent positive shock to production affects the country which initially had a positive current account balance.

Find the total negative charge in a solid copper penny : Pennies today are copper-covered zinc, What are the total positive charge and total negative charge in a solid copper penny that is electrically neutral

Quality and patient safety by setting : Quality and Patient Safety By Setting

User Account

All Pages