Question: MACRO ECON - PLEASE OUTLINE CORRECT ANSWER PLEASE AND THANKS Consider the following real intertemporal model with investment. - The representative consumer faces labour-leisure choice

MACRO ECON - PLEASE OUTLINE CORRECT ANSWER PLEASE AND THANKS

MACRO ECON - PLEASE OUTLINE CORRECT ANSWER PLEASE AND THANKS Consider the

Consider the following real intertemporal model with investment. - The representative consumer faces labour-leisure choice problem in each of the two periods. Also she chooses how much to save. - The representative firm faces profit maximization questions in each of the two periods. Also it chooses how much to invest. At the end of the second period, the firm liquidates all of its remaining capital and includes it in profit. - Production function: Y = ZF(K,N), Y'= z'(K'N') - Suppose K is owned by the firm. So the only cost of production is the labour cost. - Evolution of capital stock is given by: K' = (1 - d)K + I, where d is the deprecation rate, and I is the investment. Suppose K = 10, d = 0.1, I = 11. What is the amount of capital at the beginning of the second period? OA. 18 O B. 20 O C. 21 OD. 19 O E. None of the above

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