Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B.Given this information,we know that in the long run
A)the growth rate of output per capita will be greater in B than in A.
B)the growth rate of output per capita will be greater in A than in B.
C)the capital-labor ratios (K / N)will be the same in both countries.
D)the growth rate of output per capita will be the same in both countries.

Question

Quizplus · Accepted Answer

In the long run, according to the Solow growth model, the growth rate of output per capita is determined by the rate of technological progress, which is assumed to be the same for both countries. Therefore, the growth rate of output per capita will be the same in both countries. However, the level of output per capita will be higher in country A due to its higher saving rate, leading to a higher steady-state capital-labor ratio.

Suppose There Are Two Countries That Are Identical with the Following