ECON 2400 Lecture Notes - Farad, Factors Of Production, Natural Disaster
Document Summary
In the current period, the output of an economy is y = zf (k, n ), it depends on the current input of capital, k, the current input of labor, N , and the current total factor productivity, z. The function f (k, n ) has the properties of constant returns to scale and decreasing marginal returns to each factor of production. De ne the capital per worker as k = k. We can rewrite the production function as y = y. Consumers collectively will receive all current real output y as income. Hence, the capital stock of the economy in the next period is given by k(cid:48) = (1 d)k + i. d is the depreciation rate of capital, which is exogenously given and constant over time. I is the aggregate investment in the current period, where i = s y . The evolution equation of k is k(cid:48) = s z f (k)