Question: PLEASE DO TRY TO ANSWER BOTH PARTS, PART B THE ANSWER IS GIVEN, BYT I STRUGGLED TO UNDERSTAND., PLEASE perform YOUR BEST, THANKS! Suppose the

PLEASE DO TRY TO ANSWER BOTH PARTS, PART B THE ANSWER

PLEASE DO TRY TO ANSWER BOTH PARTS, PART B THE ANSWER IS GIVEN, BYT I STRUGGLED TO UNDERSTAND., PLEASE perform YOUR BEST, THANKS!

Suppose the capital intensity of production (?) is 0.3, the mark-up is 20%, the depreciation rate is 6% and the real interest rate is 4%.

(a) Use the equation for the desired capital stock in the short run [MPK / (1 + u) 6 = r] to calculate the desired capital stock relative to production (you may assume a Cobb-Douglas production function if you like)

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