Question: Consider three countries that have the same production function: y = 4(k) 1/2 Bohania is initially endowed with 100 units of capital Mclureville is initially

Consider three countries that have the same production function: y = 4(k)^1/2

Bohania is initially endowed with 100 units of capital

Mclureville is initially endowed with 10,000 units of capital

Curottston is initially endowed with 1,000,000 units of capital

a. What will GDP be in each country?

b. Suppose 10% of all capital depreciates each year. How many units of capital wear out in the first year for each country?

c. Suppose people in all three countries have the same propensity to consume, and typically consume 75% of output. How many new units of capital will each country have next year?

d. For which countries will output be greater next year, less next year, and the same next year. Why?

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