Question

Suppose there are two very similar countries (call them Countries C and D). Both countries have the same population, and they are both experiencing the same population growth (that is, N is identical in both countries, and grows at the same rate g subscript N ). Both countries also depreciate capital at the same rate (d). Suppose that both countries have the same technology and experience the same technological progress (g subscript A is identical in both countries), that both countries have the same savings rate, and that we observe that both countries are in steady state. True or false, output per worker (LaTeX: \frac{Y}{N}Y N ) must be equal in both countries. Group of answer choices

Answer 1

Answer: True

Explanation:

According to the Solow Model, Savings and Investment determine the level of Output, Income and Capital. If these two countries are similar in savings and Investment as well as underlying factors such as population and population growth, it can be said for certain that they should both have the same output. Output per worker is equal in both countries.