Consider the following Cobb-Douglas production function: Y AL K¹-0 where 0 = 0.25 Assuming settings of Neo-Classical theory of investment derive the following: a. Function representing the current value of desired stock of capital. b. Current value of desired stock of capital when output is 5 billion $ while rental cost is 0.12. c. Now suppose output is expected to rise to 7 billion $, find corresponding value in desired stock of capital?

Answer the following questions. (a) Can production satisfy both constant returns to scale and diminishing (marginal) returns to capital? (b) Observing a downward trend in the prices of capital goods, some companies decide to decrease or postpone their purchases of such goods. All else equal, will the real interest rate increase or decrease?

What are the effects of an increase in government expenditure on infrastructure capital on the demand for labor, the real wage rate, the full-employment quantity of labor, and potential GDP? An increase in government expenditure on infrastructure capital _______ the demand for labor, which _______ the real wage rate.     A. increases; decreases   B. decreases; increases   C. increases; increases   D. decreases; decreases

2) Consider an economy with depreciation 6=.2, saving rate s = .1. Worker productivity grows at rate g = .1. The economy starts with 5 units of capital per worker. The productivity function is given by: 2tnioq S) m6x9 grit no bazzim 23 0 2 2 19 0 f(k) = 3* k1/3 (1916978 zi 19verlɔirlw how to two lapiolandotdwong noitsluqoq TUOHTIW lebom wolo2011 ( The Marginal Product of capital is therefore 100037950 1 ritwong ytivitoub 1910 190 stign .6 MPK = 3* know 19q gniv brs (19) a. Using the above parameters, what is the golden rule steady state capital per (effective) worker? Please show your work below.