Question

Explain why most macroeconomists do not need to precisely measure the initial capital stock in their data in order to good idea of the recent size (value) of the capital stock. For example how could an extended data set on investment be used to create an estimate for the capital stock. Your answer should have an equation in it and explanation of which variables are measurable and if so how they are typically measured.

Answer 1

The capital stock resources is also an importent factor which need to consider in economic growth mainly physical capital stock like machinery,building etc . This is also a main factors of production. The normaly it is difficult to measure a figures regarding the initial capital stock for getting the idea of size or value of the capital stock is not too much precise but made an estimate regarding this.The direct measure of data regarding is very difficulty to in this case so they are choosing some of the appropriate estimation technique to construct the measure of the capital stock.
An internationally applied method of measuring this one is perpectual inventory model.
From this point of view the economies capital stock considered as an inventory.so the variable used in this model for the measure of estimation of capital stock is given below
: Net capital stock beginning period(kt)

That the sum of other varible like net capital stock in previous period (kt -1)and gross investment (It)in previous period and this sum deducted from the consumption of fixed cost (Dt-1).
Kt= kt-1 + I t -D t-1