Suppose That Two Countries Share Identical Levels of Total Factor

question 59

Multiple Choice

Suppose that two countries share identical levels of total factor productivity, identical labour force growth rates and identical savings rates. According to the Solow model,

• A) the country with the greater initial level of output per worker will grow more rapidly than the country with the smaller initial level of output per worker.
• B) the country with the smaller initial level of output per worker will grow more rapidly than the country with the greater initial level of output per worker.
• C) both countries will have the same growth rates of output per worker, even if they start out with different levels of output per worker.
• D) if both countries start out with different levels of income per worker, both countries may have different growth rates of output per worker, but we cannot be certain which country will have the higher growth rate of output per worker.
• E) the country with the smaller initial income per worker will grow more rapidly than the country with the greater initial level of income per worker.

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Definitions:

Storage Costs

Expenses associated with keeping goods stored in a warehouse or other facility until they are sold or used.

Interest Rate

The interest rate a borrower incurs for the money lent to them by a lender.

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.

Interest Rate

The cost of borrowing money, usually expressed as a percentage of the amount borrowed, paid to the lender over a specified period.