Assume that two countries both have the per-worker production function y = k1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital-labor ratio of 4 and B starts out with a capital-labor ratio of 2, in the long run:
A) both A and B will have capital-labor ratios of 4.
B) both A and B will have capital-labor ratios of 16.
C) A's capital-labor ratio will be 4 whereas B's will be 16.
D) A's capital-labor ratio will be 16 whereas B's will be 4.
Correct Answer:
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