Suppose that in the year 2010 the quantity of capital per wo

Suppose that in the year 2010, the quantity of capital per worker in a certain country was equal to 100, the quantity of output per worker equaled 50, the fraction of output invested was 20%, and the depreciation rate was 5%.

a.) Calculate the change in the capital per worker. (2 points)

b.) Based on your answer to part (a), what would be the quantity of capital per worker in year 2011? (2 points)

Solution

Output per worker = 50

20% of 50 = 10

So now investment on workers= 100+10 =110

Depreciation= 5%

So 5% of 110= 11/2= 5.5

So; New capital investment on workers= 110-5.5= 105.5

a) Change in capital outer worker= 105.5-100 = 5.5

b) Quantity of investment of capital purr worker in 2011 = 105.5.