If Two Economies Are Identical (Including Having the Same Saving

question 10

Multiple Choice

If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor) , but one economy has a smaller capital stock, then the steady-state level of income per worker in the economy with the smaller capital stock:

• A) will be at a lower level than in the steady state of the high capital economy.
• B) will be at a higher level than in the steady state of the high capital economy.
• C) will be at the same level as in the steady state of the high capital economy.
• D) will be proportional to the ratio of the capital stocks in the two economies.

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Definitions:

Functional Currency

The primary currency of the primary economic environment in which an entity operates and generates cash flows.

Exchange Rates

The speed at which one currency can be swapped for another, affecting global trade and investments.

U.S. Balance Sheet

A financial statement that shows the assets, liabilities, and shareholders' equity of a company as per U.S. accounting standards at a particular point in time.

Consolidated Balance Sheet

A financial statement showing the combined assets, liabilities, and shareholders' equity of a parent company and its subsidiaries.