Question
In: Economics
1-2) A) Sketch the relation between output per worker (Y/N) and capital per worker (K/N) in...
1-2) A) Sketch the relation between output per worker (Y/N) and capital per worker (K/N) in the figure below. Label the axis.
B) Define “ The Golden Rule Level of Capital”.
Solutions
Expert Solution
Output per Worker (Y/N) is denoted by f(k), capital per worker (K/N) is denoted by k in the following graph. f(k) and k have a positive relation. The curve is a concave curve, denoting as k increases f(k) increases at a decreasing rate:
The steady state value of capital per worker (K/N) that maximizes consumption is called Golden Rule Level of Capital and is denoted by k*gold .
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