[Solved] An Economy Has a Capital Stock of 100

Question 130

An economy has a capital stock of 100. The economy's labor, technology, and education levels are constant, and the economy has a production function that can be described by . img The depreciation rate can be described by the linear function depreciation = 0.02K. Suppose the initial investment rate is investment = 0.2 and then some foreign savings start flowing into the economy. This investment function then changes to 0.3. By how much does the steady state capital stock change? By how much does output change? Show all your calculations.

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