Consider two developed and developing countries, the population growth rate of developed countries is 2 percent per year and saving rate of 30 percent. The developing country has a population growth rate of 5 percent and saving rate of 10 percent. Suppose that initial technology of the developed country is 10 times higher than that of the developing country and that both countries have the same productivity growth and depreciation rate: g = 0.02 and 6 = 0.03. Assume that a = 1/ 3. In a steady state, how much is the developed country's GDP per capita larger than the developing country?
Consider two developed and developing countries, the population growth rate of developed countries is 2 percent per year and saving rate of 30 percent. The developing country has a population growth rate of 5 percent and saving rate of 10 percent. Suppose that initial technology of the developed country is 10 times higher than that of the developing country and that both countries have the same productivity growth and depreciation rate: g = 0.02 and 6 = 0.03. Assume that a = 1/ 3. In a steady state, how much is the developed country's GDP per capita larger than the developing country?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
2
Transcribed Image Text:Consider two developed and developing countries, the population growth rate of
developed countries is 2 percent per year and saving rate of 30 percent. The
developing country has a population growth rate of 5 percent and saving rate of 10
percent. Suppose that initial technology of the developed country is 10 times higher
than that of the developing country and that both countries have the same
productivity growth and depreciation rate: g = 0.02 and 6 = 0.03. Assume that a = 1/
3. In a steady state, how much is the developed country's GDP per capita larger than
the developing country?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education