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Consider an economy in which the amount of investment

24 / 01 / 2019 Assignments

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Consider an economy in which the amount of investment

Consider an economy in which the amount of investment is equal to the amount of savings (i.e., the economy is closed to international flows of capital). Any output that is not saved is consumed. The production function is y=Ak?. Find the value of ?, the fraction of output of income that is invested, that will maximize the steady-state level of consumption per worker. (This is called the “golden rule” level of investment) How do you interpret that?


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