If two countries have the same aggregate production function, rate of technological growth, and savings rate, then
A)they will always have the same per-capita income
B)the country with the higher rate of population growth will have a higher per-capita income
C)the country with the lower rate of population growth will have a higher per-capita income
D)the country with the highest depreciation rate will have the highest per-capita income
E)both C and D

Question

Quizplus · Accepted Answer

Population growth affects the per-capita income. The country with the lower population growth rate will have a higher per-capita income. A higher population growth rate leads to a higher labor force, which may result in a higher level of output. However, this higher output must be divided among the larger workforce, resulting in a lower per-capita income. Therefore, the population growth rate plays a crucial role in determining the per-capita income, and the country with the lower population growth rate will have a higher per-capita income. The depreciation rate has no direct impact on per-capita income as it is a measure of the capital stock's wear and tear.

If Two Countries Have the Same Aggregate Production Function, Rate