Suppose the U.S. has an investment opportunity which costs $200 which will increase output from 100 to 110 per quarter. The investment would take effect after t = 0. What is the marginal product of capital (MPK)? What is the difference in the present value of future income in the U.S. of undertaking the investment if the real world interest rate is 8%? Should the U.S. borrow from abroad to fund the investment and why? TYPO*. Increased output from 100 to 110 per YEAR (not quarter).

Suppose the U.S. has an investment opportunity which costs $200 which will increase output from 100 to 110 per quarter. The investment would take effect after t = 0. What is the marginal product of capital (MPK)? What is the difference in the present value of future income in the U.S. of undertaking the investment if the real world interest rate is 8%? Should the U.S. borrow from abroad to fund the investment and why? TYPO*. Increased output from 100 to 110 per YEAR (not quarter).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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