If the production function in a country is Y = K^1/2, the investment rate equals 0.25, and the depreciation rate is 0.05, then the steady-state level of the capital stock is equal to: A) 5 units. B) 10 units. C) 15 units. D) 25 units.

Question

Quizplus · Accepted Answer

In the steady state, investment equals depreciation: sY = δK. Given Y = K^1/2, s = 0.25, and δ = 0.05, we solve 0.25K^1/2 = 0.05K, leading to K = 25.

If the Production Function in a Country Is Y =