# Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital...

###### Question:

Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 35 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 5.0 percent per year, and the capital-output ratio is 4.5. Suppose that the production function is Cobb- Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. a. In the initial steady state, what is the savings rate (8)?
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 35 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 5.0 percent per year, and the capital-output ratio is 4.5. Suppose that the production function is Cobb- Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. b. In the initial steady state, what is the marginal product of capital (MPK)? MPK =
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 (MPK Pola)? MPKjold = d. What will the capital-output ratio be at the Golden Rule steady state (*)? K* = I gold
e. e. What must the saving rate be to reach the Golden Rule steady state (gold)? Sgold =

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