For an economy with a Cobb-Douglas production function in which 1/3 of income goes to capital and 2/3 of income goes to labor,and which has a 6% rate of depreciation,the Golden Rule investment rate is

Question

Quizplus · Accepted Answer

The Golden Rule level of capital accumulation is achieved when the saving rate equals the share of income that goes to capital. In a Cobb-Douglas production function, this share is represented by the parameter alpha (α), which in this case is 1/3, indicating that 1/3 of income goes to capital. Therefore, the Golden Rule investment rate is 1/3.

For an Economy with a Cobb-Douglas Production Function in Which