A delegation from Transylvania is seeking your advice with regards to if the country should open up and allow international capital flows.
Some data about Transylvania: It is currently a closed economy, its national savings rate is 20percent; capitals share of income is 25 percent; and the depreciation rate of the capital stock is5 percent. Its labor force has been growing 1 percent per year over the past 10 years. And bothoutput per worker AND capital per worker have been growing at 6 percent per year over the past10 years. These trends are expected to continue for the indefinite future.
Required:
a. Is Transylvania on a balanced growth path?
b. What is the real rental rate of capital in Transylvania?
Answers: 3
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A delegation from Transylvania is seeking your advice with regards to if the country should open up...
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