Question
In: Economics
what will the capital stock be next period if the initial stock is K0=802, investment is...
what will the capital stock be next period if the initial stock is K0=802, investment is I=111, and the depreciation rate is d=.12 round answer to one decimal place.
Solutions
Expert Solution
Initial capital stock is K0= 802
Investment I= 111
Initial capital stock K0 is depreciated at rate d=0.12 , so replacement investment = d*K0 = 0.12*802=96.24
Net investment in the next period = Investment-replacement investment= 111-96.24= 14.76
Let capital stock in next period be K1.
Net investment or increase in productive capital stock= K1-K0
14.76=K1-802
14.76+802=K1
816.76=K1
Capital stock in next period is 816.8
Rahul Sunny answered 2 years agoRelated Solutions
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