In the United States, the capital share of GDP isabout 30 percent; the average growth in outputis about 3 percent per year, the depreciation rateis about 4 percent per year; and the capital-out-pút ratio is about 2.5. Suppose that the produc-tion function is Cobb-Douglas, so that the capi-tal share in output is constant, and that theUnited States has been in a steady state. c. Suppose that public policy raises the savingrate so that the economy reaches the GoldenRule level of capital. What will the marginalproduct of capital be at the Golden Rulesteady state? Compare the marginal product atthe Golden Rule steady state to the marginalproduct in the initial steady state. Explain.

c. Suppose that public policy raises the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.

c. Suppose that public policy raises the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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