What is the marginal product of capital

Reference no: EM132200308

Question: Assume that a country's production function is: Y = AL0.7K0.3

(a) The ratio of capital to output is 3. The growth rate of output is three percent. The depreciation rate is four percent. What is the marginal product of capital in this situation? Hint: Use calculus to differentiate the production function with respect to K.

(b) If the economy is in a steady state, what must be the savings rate? Explain.

(c) (Hard) What should be the target savings rate for this country? Graphically explain what savings rate will be the ideal savings rate for this economy.

Reference no: EM132200308

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