Barro PP-III.F. - Capital Input Capital utilization rate The fraction of the capital stock used in production(the Greek letter kappa represent the

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Macroeconomics - Barro Chapter 9 1 Capital Input Capital utilization rate The fraction of the capital stock used in production. κ (the Greek letter kappa) represent the utilization rate for the capital stock, K . Y = A · F ( κ K , L )
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Macroeconomics - Barro Chapter 9 2 Capital Input κK , rises with the utilization rate, κ . Therefore, an increase in κ raises real GDP, Y , for a given technology level, A , capital stock, K , and labor input, L .
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Macroeconomics - Barro Chapter 9 3 Capital Input The Demand for Capital Services Firms maximize real profit π/ P = A · F [( κK ) d , L d )] −( w / P ) · L d − ( R / P ) · ( κK ) d
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Macroeconomics - Barro Chapter 9 4 Capital Input
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Macroeconomics - Barro Chapter 9 5 Capital Input The Demand for Capital Services Assume that the technology level rises from A to A’. This change raises the MPK at a given quantity.
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Macroeconomics - Barro Chapter 9 6 Capital Input
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Macroeconomics - Barro Chapter 9
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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Barro PP-III.F. - Capital Input Capital utilization rate The fraction of the capital stock used in production(the Greek letter kappa represent the

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