6. In Country A, the share of payments to capital in total factor payments (%u03

Question

6. In Country A, the share of payments to capital in total factor payments (%u03B1) is 30 percent, and the

capital-output ratio is 2, the depreciation rate (%u03B4) is 5 percent, the rate of growth of labor

augmenting technological progress (g) is 4 percent, and the rate of growth in the labor force (n) is 1

percent. The economy is in steady state. Where is Country A relative to the Golden Rule level of

capital?

a) Country A has too much capital relative to the Golden Rule.

b) Country A has too little capital relative to the Golden Rule.

c) Country A is at the Golden Rule.

d) We do not have enough information yet to answer the question de%uFB01nitively. Country A could

be below, above, or at the Golden Rule

Explanation / Answer

Country A has too little capital relative to the Golden Rule

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.