Assume two economies are identical in every way except that one has a higher saving rate.According to the Solow growth model,in the steady state,the country with the higher saving rate will have __________ level of total output and __________ rate of growth of output as (than)the country with the lower saving rate.
A)a higher;a higher
B)a higher;the same
C)a lower;a higher
D)a higher;a lower
E)the same;the same

Question

Quizplus · Accepted Answer

In the Solow growth model, a higher saving rate leads to a higher steady-state level of capital and thus a higher level of total output. However, in the steady state, the growth rate of output is determined by the rate of technological progress, which is the same for both countries, so the growth rate of output is the same.

Assume Two Economies Are Identical in Every Way Except That