Assume That Two Countries Both Have the Per-Worker Production Function

question 38

Multiple Choice

Assume that two countries both have the per-worker production function y = k^1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If country A starts out with a capital-labour ratio of 4 and country B starts out with a capital-labour ratio of 2, in the long run:

• A)both country A and country B will have capital-labour ratios of 4.
• B)both country A and country B will have capital-labour ratios of 16.
• C)country A's capital-labour ratio will be 4, whereas country B's will be 16.
• D)country A's capital-labour ratio will be 16, whereas country B's will be 4.

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Definitions:

Percentage Calculation

The mathematical process of finding a portion of a number, represented as a fraction of 100.

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The percentage of a sale price paid to the salesperson or agent responsible for facilitating the transaction.