Assume that technological progress does not occur. In Japan, the rate of saving has generally been greater than in the U.S. Given this information, we know that in the long run:
A) The U.S. growth rate will be greater than the Japanese growth rate.
B) Output per worker in Japan will be greater than U.S. output per worker.
C) Output per worker in the U.S. will be greater than Japanese output per worker.
D) Japan's growth rate will be greater than the U.S. growth rate.
E) Capital per worker in Japan will be no different than U.S. capital per worker.

Question

Quizplus · Accepted Answer

In the absence of technological progress, the growth rate of an economy is primarily determined by its rate of saving and investment. A higher saving rate in Japan compared to the U.S. implies more resources are available for investment in capital. This leads to a higher capital per worker ratio in Japan, which, according to the Solow model of economic growth, results in higher output per worker in Japan compared to the U.S.

Assume That Technological Progress Does Not Occur