Assume two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state the country with the higher saving rate will have ______ level of output per person and ______ rate of growth of output per worker as/than the country with the lower saving rate.

Question

Quizplus · Accepted Answer

According to the Solow growth model, a higher saving rate leads to a higher level of capital accumulation, which in turn leads to a higher level of output per person. Additionally, in the steady state, the country with the higher saving rate will also have a higher rate of growth of output per worker due to the increased capital accumulation. Therefore, the answer is D, a higher level of output per person, and a higher rate of growth of output per worker.

Assume Two Economies Are Identical in Every Way Except That