QUESTION 10 An economy with no population and no technology

QUESTION 10 An economy with no population and no technology growth has a Cobb-Douglas production function with the share of capital income in total income equal to 0.3 and an unknown depreciation rate. Currently, half of all income goes to investment and the rest goes to consumption. This economy is saving too much saving just the right amount saving too little cannot be determined without knowing the depreciation rate

Solution

Ans

It can\'t be determined without knowing deprecistion rate. We need to subtract depreciation from investment to know whether it is saving too much or not