If two economies are identical (including having the population growth rates and efficiency of labour),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 will be:

Question

Quizplus · Accepted Answer

A lower saving rate means that there is less investment in the economy, resulting in a smaller capital stock. As a result, the economy with the lower saving rate will have a lower level of income per worker in the steady state compared to the high-saving economy. This is a reflection of the fact that a smaller capital stock means that the production function has lower marginal productivity, which translates into lower wages and lower output per worker.

If Two Economies Are Identical (Including Having the Population Growth