Answer to Question #194217 in Macroeconomics for Nolo

Question

From a macroeconomic perspective, the role played by government capital investment can be briefly illustrated with the aid of a Solow-type aggregate production function (Black, Calitz & Steenkamp, 2015). Elaborate on this statement.

Answer 1

$Δk=sy-(n+g+δ)k$

Demand side by a Keynesian-style consumption function, and supply side by a Neoclassical-style production function. Combine the two to get a difference/differential equation on physical capital, then show the dynamics and steady state.