If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach: a. A lower steady-state level of output than it would have before the disaster b. None of these answers is correct C. The same steady-state level of output as it would have before the disaster d. A higher steady-state level of output than it would have before the disaster e. Not enough information is given
Question 2 If a natural disaster destroys a large portion of a country's capital stock but the saving and
a. A lower steady-state level of output than it would have before the disaster
b. None of these answers is correct
C. The same steady-state level of output as it would have before the disaster
d. A higher steady-state level of output than it would have before the disaster
e. Not enough information is given
now suppose you are given the data for Brazil and Portugal. In Brazil, the saving rate is 0.1 and the depreciation rate is 0.1, while in Portugal saving rate is 0.2 and the depreciation rate is 0.1. Using the Solow model, you conclude that in the steady-state:
a. Brazil has a higher capital-output ratio than Portugal
b. Portugal has a higher capital-output ratio than Brazil
c. Brazil has a higher level of output than Portugal
d. Portugal has a higher level of output than Brazil Portugal and Brazil have the same capital-output ratio
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