Question

For the first several questions, you will deal with Westburg, a nation with a per-worker production function y = f(k) = 5k^1/2 (5 times the square root of k). The marginal product of capital for this production function is 2.5k^-1/2 (2.5 times 1 divided by the square root of k, or 5 divided by (2 times the square root of k)). The economy starts with 400 units of capital per worker (see Table One); people in the economy consume 86% of each dollar of income they earn, and machinery depreciates at a steady rate to be totally used up/worthless in 50 years. There is no technology or population growth.

Row	k	y	c	i	δk	Δk
1	400	a	b	c	d	e
2	f	g	h	i	j	k
3	l	m	n	o	p	q

1) Enter your answer for Cell a in Table One

2) Enter your answer for Cell e in Table One

3) Enter your answer for Cell f in Table One

4) Enter your answer for Cell h in Table One

5) Calculate its steady-state level of capital per worker. Round your answer to the nearest whole number.

Answer 1

Date Pogo y e f (h) - skk, SkiS Morginal product of capital a dy a 2.5kois The economy starts a ker00 - y 5x100°. e) y = 100 units • Consumption ca se 100 - 86 unity Juustment a 100-86 a 14 unity - Depreciation = 410 - . . SKB so Now AX = (y-c) - du a 14-826 writy So, in mest now capital stoch would be 406 unity i income ya sx4060.5 = 100.75 i consumption a 86 x 100.75 = 86.645 so se la loo uwih low e 405 unit om 3 e a 6 unity an) 41h = 86.65 unit Aus 3) steady state level of capital per warken Anleves where investment and depreciation feel - yasur inestunt = 14 x suis K 6400 49