Calculate the quantity of capital at beginning of years one

Question

Problem

Let Kt denote the quantity of capital a country has at the beginning of period t. Also, suppose that capital depreciates at a constant rate d, so that dK_t of the capital stock wears out during period t. If investment during period t isdenoted by I_t, and the country does not trade with the rest of the world (the current account surplus is always zero), then we can say that the quantity of capital at the beginning of period t + 1 is given by

K_t+1 = (1 - d)K_t + I_t

Suppose at the beginning of year 0 that this country has 80 units of capital. Investment expenditures are 10 units in each of years 0, 1, 2, 3, 4, ... , 10. The capital stock depreciates by 10% per year.

(a) Calculate the quantity of capital at the beginning of years 0, 1, 2, 3, 4, ... , 10.

(b) Repeat part (a), except assume now that the country begins year 0 with 100 units of capital. Explain what happens now, and discuss your results in parts (a) and (b).

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.