Assume a production function is given by
)If
,the depreciation rate is
,and the saving rate is
,the steady-state level of capital is about:

Question

Assume a production function is given by 
)If 
,the depreciation rate is 
,and the saving rate is 
,the steady-state level of capital is about:

Quizplus · Accepted Answer

The steady-state level of capital (k*) can be calculated using the following formula:
k* = (s * A / δ)^(1 / (1-α))
where s is the saving rate, A is the level of technology, δ is the depreciation rate, and α is the capital's share in the production function.

Plugging in the given values, we get:
k* = (0.2 * 1 / 0.1)^(1 / (1-0.3))
k* = 2.81

Therefore, the steady-state level of capital is approximately 2.8. Thus, the best choice is C.

Assume a Production Function Is Given by