What is the real rental price of capital

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Reference no: EM132994975

Question 1: Suppose a government has a tax revenue shortfall. Will hyperinflation inevitably follow unless the government cuts its fiscal expenditures?

Question 2: Assume that the production function is given by Y = AK L , where Y is GDP, K is capital stock, and L is labor. The parameter A is equal to 10. Assume also that capital is 100, labor is 400, and both capital and labor are paid for their marginal products.

a. What is Y?
b. What is the real wage of labor?
c. What is the real rental price of capital (the amount of output paid per unit of capital)?

Reference no: EM132994975

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