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In: Economics

The Banana Republic’s stock of capital at the end of 2015 was $200 billions. The Republic’s...

The Banana Republic’s stock of capital at the end of 2015 was $200 billions. The Republic’s investment during the year 2016 was $ 40 billions. The depreciation rate in the Republic was 10%.

23- Depreciation of the capital during the year 2016 was _______

a. $20.0 billions              c. $13.0 billions

b. $24.0 billions             d. $180.0 billions            e. $10.0 billions

24- The net investment during the 2016 in the Republic was _______

a. $20.0 billions              c. $13.0 billions

b. $8.0 billions               d. $10.9 billionse. $16.0 billions

25. The stock of capital at the end of 2016 was _________

a. $100.0 billions                        c. $13.0 billions

b. $220.0 billions                        d. $93.0 billions

e.  can’t be determined

I know the answers I need to know formulas/ how to get the answers

Solutions

Expert Solution

23)

Total depreciation = depreciation rate * Initial Capital stock

Hence, Depreciation of the capital during the year 2016 = depreciation rate * Capital stock in 2015

Here, depreciation rate = 10% = 0.10 and Capital stock in 2015 = 200 billion

Hence, Depreciation of the capital during the year 2016 = 0.10*200 billion = 20 billion.

Hence, the correct answer is (a) $20.0 billions

24)

Net Investment = Gross investment - Total depreciation

=> Net investment during 2016 = investment during the year 2016 - Depreciation of the capital during the year 2016

= 40 billion - 20 billion

= 20 billion

Hence, the correct answer is (a) $20.0 billions

25)

New capital stock = Initial capital sock + Net investment

=> The stock of capital at the end of 2016 = Capital stock in 2015 + Net investment during 2016

= 200 billion + 20 billion

= 220 billion

Hence, the correct answer is (b) $220.0 billions

Rahul Sunny answered 3 hours ago
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