Question 3 15 Points 3 Points Each In Turkey The Labor Share Of Gdp Is About 60 Percent The Average Growth In Outpu 1 (52.71 KiB) Viewed 45 times
Question 3 [15 points, 3 points each] In Turkey, the labor share of GDP is about 60 percent, the average growth in output is about 5 percent per year, the depreciation rate is about 5 percent per year, and the capital-output ratio is 2. Suppose that the production function is Cobb-Douglas and that Turkey has been in a steady state. a. What must the saving rate be in the initial steady state? b. What is the marginal product of capital in the initial steady state? c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.
d. What will the capital-output ratio be at the Golden Rule steady state? e. What must the saving rate be to reach the Golden Rule steady state?
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