Answer:
The new steady state of capital stock = 10
Explanation:
At steady state change in capital stock is equal to zero . As well as depreciation is equal to investment.
So, investment = Depreciation
0.3\sqrt{}K = 0.02 K
0.3 / 0.02 = k / \sqrt{}K
15 = \sqrt{}K
Thus K = 15*15 = 225 and Y = \sqrt{}K = \sqrt{}225 = 15
However when depreciation will increase from 0.02 to 0.03 then new steady state will be as follows
Investment = Depreciation
0.3 \sqrt{}K = 0.03 K
0.3 / 0.03 = k / \sqrt{}K
10 = \sqrt{}K
K = 10*10 = 100
Thus new steady state of capital stock ( K s s ) = 100 and new steady state of output ( Y s s) will be = \sqrt{}K = \sqrt{}100 = 10
