Refer to the following figure when answering the following questions.
Figure 5.5: Solow Diagram
-Figure 5.5 represents two countries, 1 and 2. Country ________ has a higher depreciation rate and, therefore, has a ________ steady state than the other country.

Question

Refer to the following figure when answering the following questions.
Figure 5.5: Solow Diagram 
-Figure 5.5 represents two countries, 1 and 2. Country ________ has a higher depreciation rate and, therefore, has a ________ steady state than the other country.

Quizplus · Accepted Answer

A higher depreciation rate means that the capital stock decreases more rapidly over time, requiring more investment just to maintain the same level of capital. This typically results in a lower steady state of capital because it's harder to accumulate and maintain a large capital stock when it depreciates quickly. Therefore, if Country 2 has a higher depreciation rate, it would have a lower steady state compared to a country with a lower depreciation rate.

Refer to the Following Figure When Answering the Following Questions