Refer to the following figure when answering the following questions.
Figure 5.5: Solow Diagram
-Consider the Solow model exhibited in Figure 5.5. Which of the following is/are true?
i. If 1 denotes Country 1 and 2 denotes Country 2, Country 1 has a higher saving rate.
ii. If 1 denotes Country 1 and 2 denotes Country 2, Country 1 has a lower depreciation rate.
iii. If 1 denotes Country 1 and 2 denotes Country 2, Country 2 has a lower steady state.
A) i
B) ii
C) iii
D) ii and iii
E) i, ii, and iii

Question

Refer to the following figure when answering the following questions.
Figure 5.5: Solow Diagram 
-Consider the Solow model exhibited in Figure 5.5. Which of the following is/are true?
i. If 1 denotes Country 1 and 2 denotes Country 2, Country 1 has a higher saving rate.
ii. If 1 denotes Country 1 and 2 denotes Country 2, Country 1 has a lower depreciation rate.
iii. If 1 denotes Country 1 and 2 denotes Country 2, Country 2 has a lower steady state.
A) i 
B) ii 
C) iii 
D) ii and iii 
E) i, ii, and iii

Quizplus · Accepted Answer

Country 1 has a higher saving rate because its saving curve is steeper. Country 1 has a lower depreciation rate because its depreciation curve is flatter. Country 2 has a lower steady state because its saving curve intersects the depreciation curve at a lower level of capital.

Refer to the Following Figure When Answering the Following Questions