Answer to Question #79731 in Economics of Enterprise for shaik

Question

Consider the infinite period model for efficient investment. The optimal consumption path is CI-C for t-1, 2, 3 as in the previous question. A countrys output Q is 100 units in each period with no shocks. The investment would require an expenditure of 100 units, and that the investment will pay off in future years by increasing the countrys output by 5 units in year 1 and all subsequent years. The country is open: it can export or import the final good, and it can save or borrow money at a world interest rate 5%. (a) Calculate the present value of output (GDP, Q) and consumption (GNE, C) with no invest ment. (b) Calculate the present value of output (GDP,

Answer 1

(a) GDP = C + I + G + NX, so to calculate the present value of output (GDP, Q) and consumption (GNE, C) with no investment we need additional information from the previous question mentioned.
(b) To calculate the present value of output we also need some additional data.