Consider an Economy Described by the Production Function Y = $\sqrt { K }$

Multiple Choice

Consider an economy described by the production function Y = $\sqrt { K }$ with 30% of output invested in new capital and 6% of the capital stock depreciating each year. If the current capital stock is 30, then the economy's capital stock would:

A) grow, and the output next period would increase.
B) grow, but the output next period would decrease.
C) shrink, but the output next period would increase.
D) shrink, and the output next period would decrease.