(1) More true/false and explain: (a) 2 points] In country A, the absolute amount
ID: 1136330 • Letter: #
Question
(1) More true/false and explain: (a) 2 points] In country A, the absolute amount of investment is greater each year than in country B. This must mean that B is wealthier than A. (b) 4 pointsl Suppose we know that A and B will converge to different steady states, but we do not know anything more than that. If we see A growing faster than B, what can we conclude? What other information might allow us to say something more? (2) 4 points] Now use these models to structure an understanding of the following sets of facts. (i) The U.S. had per-capita income similar to that of Britain in 1800. By 1930, the U.S. per capita i) In 1820, German per-capita income was much lower than that of Britain. By the late 1920s, (ii) The U.S. growth has always been "low but steady," about 2 percent per year without much income was much higher than Britain's. German incomes were higher. Today they are about the same again. deviation from that.Explanation / Answer
1)
a) False. I = S = s.Y if saving rate, s, is same in the two counties then A will be able to invest more only when Ya>Yb. Thus YA is wealthier.
b) If A is growing at a faster pace, we can say that A is a developing country while B is a developed country and A has steady state level that is farther than that of B. Other information needed is the starting point of the two countries.
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