Imagine an economy with production function Y = F(K) = $\sqrt { K }$ and 400 units of capital. If the fraction of output invested in new capital is $\gamma$ = 0.2, the depreciation rate is $\delta$ = .05, and the economy starts with output of 20, what does the Solow model predict will happen to output in the long run?

Question

Imagine an economy with production function Y = F(K) = $\sqrt { K }$ and 400 units of capital. If the fraction of output invested in new capital is $\gamma$ = 0.2, the depreciation rate is $\delta$  = .05, and the economy starts with output of 20, what does the Solow model predict will happen to output in the long run?

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The Answer of Imagine an economy with production function Y = F(K) = $\sqrt { K }$ and 400 units of capital. If the fraction of output invested in new capital is $\gamma$ = 0.2, the depreciation rate is $\delta$  = .05, and the economy starts with output of 20, what does the Solow model predict will happen to output in the long run?

Imagine an Economy with Production Function Y = F(K) = K\sqrt { K }K​

Imagine an Economy with Production Function Y = F(K) = $\sqrt { K }$