The Zambian economy is characterized by the neoclassical model with the following supply and demand conditionsSUPPLY: Y=f(K L)=2K0.5L0.5 MPL =K0.5//L0.5 MPK= L0.5/K0.5 K=100 L=400DEAMAND: C=10+0.80Yd I=50+5ir G=T=$200 X-M=0a) Using your basic macroeconomics compute the real GDP for this economy? What share of national income goes to workers and capital? Show your work (7 marks)b) Compute the interest rate that produces equilibrium in the Zambian goods market. Use the demand-supply diagram (with ir on the vertical axis) to show the equilibrium interest rate.View complete question
