Gce Model Questions Vol1 2024 Economics Question 1
Practice objective / multiple choice question 1 from the 2024 Gce Model Questions Vol1 Economics examination.
Country A's aggregate production function per worker is given by \( y = k^{0.5} \). The depreciation rate is \( \delta = 0.03 \) and the population growth rate is \( n = 0.02 \). In the steady state before any tax change the capital per worker is observed to be \( k^{*}=144 \). The government then imposes a tax that reduces the effective savings rate by 20 % of its original value. After the tax the steady‑state output per worker falls to \( y^{*}=9.6 \). Determine the original savings rate \( s \) (as a proportion of output) and the new savings rate after the tax.
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This is Gce Model Questions Vol1 2024 Economics Question 1. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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