If two economies are identical (with the same population growth rates and rates of technological progress), but one economy has a lower saving rate, then the steady-state level of income per worker in the economy with the lower saving rate:

Question

Quizplus · Accepted Answer

The steady-state level of income per worker is determined by the level of capital per worker. A lower saving rate means less investment, and therefore less capital accumulation. As a result, the steady-state level of income per worker in the economy with the lower saving rate will be at a lower level than the steady state of the high-saving economy.

If Two Economies Are Identical (With the Same Population Growth