3. In Country 1 the rate of investment is 5%, and in Country 2 it is 20%. The two countries have the same levels of productivity, A, and the same rate of depreciation, d. (a) Assuming that the value of a is 1/3, what is the ratio of steady-state output per worker in Country 1 to steady-state output per worker in Country 2? (b) What would the ratio be if the value of a were 2/3?
3. In Country 1 the rate of investment is 5%, and in Country 2 it is 20%. The two countries have the same levels of productivity, A, and the same rate of depreciation, d. (a) Assuming that the value of a is 1/3, what is the ratio of steady-state output per worker in Country 1 to steady-state output per worker in Country 2? (b) What would the ratio be if the value of a were 2/3?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:3.
In Country 1 the rate of investment is 5%, and in Country
2 it is 20%. The two countries have the same levels of productivity, A, and
the same rate of depreciation, d.
(a) Assuming that the value of a is 1/3, what is the ratio of steady-state output per
worker in Country 1 to steady-state output per worker in Country 2?
(b)
What would the ratio be if the value of a were 2/3?
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