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Two countries, A and B, diverge in population growth rates and rates of the investment. Country A has investment rate of 10% of GDP and the population growth rate of one percent per year, while country B has investment rate of 20% of GDP and its population grows at four percent per year. Both countries encompass the same rate of depreciation of 5% and α = 1/3. Use the Solow model to compute the ratio of their steady state levels of income per capita. How can you discuss the result?

If two countries steady state level of per capita income was stated by Solow model and they had the similar values for α and δ but dissimilar values for n, what would their ratio of the per capita income be?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M913993

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