Question 19 1 pts Consider the Solow growth model. Suppose you have two countrie

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Question 19 1 pts Consider the Solow growth model. Suppose you have two countries, Japan and South Korea. Looking through their very detailed statistics that both countries collect, you discover that these countries are virtually identical. You notice that both countries have the same population (N). Population grows at the same rate (gN 0) in both countries, and everyone in the economy works (that is, population and employment are the same thing) You also notice that both countries have the same production function [Y-F(K; AN)], and the production function satisfies the assumptions of the Solow model. Both economies depreciate capital at the same rate, 8, and in both countries technology advances at the same rate (gA 0). Both economies have the same savings rate, s. You dig deeper into the similarities of these two countries, and you discover that this ear, total output in both countries is identical. You also note that both countries are in steady state. Suppose now that technological progress in Japan increases. We should expect that

Explanation / Answer

Answer : Option c is correct.

Because from the given informations it is clear that both countries Japan and South Korea has the same total output level and same steady state level and same technological advancements and same economic depreciation in capital and same population growth. As increasing technical progress increase the production level which increase the total output level, if technical progress increase in Japan then this shift the existing production function curve in upward and because of higher production total output level increase in Japan at a faster rate in comparison to the growth rate of South Korea's total output level.

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