2) Assume that two countries are identical in every respect, except Country A initially has more capital per worker than Country B (i.e. they have the same saving rate (s), labor supply growth rate (n), depreciation rate (d), total factor productivity (A), and elasticity of output with respect to capital (a)). A) According to the Solow model, which country has greater income per worker initially? B) According to the Solow model, which country will grow faster in the short-run? What about the long-run? Explain your answer. C) Compare Country A’s steady-state output per worker with Country B’s in the Solow model. Explain.
2) Assume that two countries are identical in every respect, except Country A initially has more capital per worker than Country B (i.e. they have the same saving rate (s), labor supply growth rate (n), depreciation rate (d), total factor productivity (A), and elasticity of output with respect to capital (a)). A) According to the Solow model, which country has greater income per worker initially? B) According to the Solow model, which country will grow faster in the short-run? What about the long-run? Explain your answer. C) Compare Country A’s steady-state output per worker with Country B’s in the Solow model. Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2) Assume that two countries are identical in every respect, except Country A initially has more capital per worker than Country B (i.e. they have the same saving rate (s), labor supply growth rate (n),
A) According to the Solow model, which country has greater income per worker initially?
B) According to the Solow model, which country will grow faster in the short-run? What about the long-run? Explain your answer.
C) Compare Country A’s steady-state output per worker with Country B’s in the Solow model. Explain.
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