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:
A) will be at a lower level than in the steady state of the high-saving economy.
B) will be at a higher level than in the steady state of the high-saving economy.
C) will be at the same level as in the steady state of the high-saving economy.
D) will grow at a slower rate than in the high-saving economy.

Question

Quizplus · Accepted Answer

A lower saving rate means that less capital will be accumulated over time, leading to a lower level of productivity and income per worker in the long run. Therefore, the steady-state level of income per worker in the economy with the lower saving rate will be at a lower level than in the steady state of the high-saving economy.

If Two Economies Are Identical (With the Same Population Growth