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Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
Edition 12ISBN: 978-1259070969Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
Edition 12ISBN: 978-1259070969 Exercise 21
( Optional ) For this question use the Cobb-Douglas production function and the corresponding desired capital stock given by
Assume that
Y = $5 trillion, and rc = 5.12.
a. Calculate the desired capital stock, K *.
b. Now suppose that Y is expected to rise to $6 trillion. What is the corresponding desired capital stock
c. Suppose that the capital stock was at the desired level before the change in income was expected. Suppose further that
in the gradual adjustment model of investment. What will the rate of investment be in the first year after expected income changes In the second year
d. Does your answer in part c refer to gross or net investment
Assume that Y = $5 trillion, and rc = 5.12. a. Calculate the desired capital stock, K *.
b. Now suppose that Y is expected to rise to $6 trillion. What is the corresponding desired capital stock
c. Suppose that the capital stock was at the desired level before the change in income was expected. Suppose further that
in the gradual adjustment model of investment. What will the rate of investment be in the first year after expected income changes In the second year d. Does your answer in part c refer to gross or net investment
Explanation
Verified
Verified
(a)
The following information is given:
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Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
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