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What is the marginal product of capital

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Reference no: EM132603460

Assume that a country's production function isY = AK0.25L0.75

The ratio of capital to output is four, the growth rate of output is five percent, and the useful life of capital is 20 years.

Assume the technology constant A = 1.

i. What is the marginal product of capital in this situation?

ii. If the economy is in a steady state, what must be the saving rate?

iii. If the economy decides to achieve the Golden Rule level of capital and actually reaches it, what will be the marginal product of capital?

iv. What must the saving rate be to achieve the Golden Rule level of capital?

Reference no: EM132603460

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