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If We Define sˉ1\bar { s } _ { 1 }

Question 118

Multiple Choice

If we define sˉ1\bar { s } _ { 1 } and sˉ2\bar { s } _ { 2 }
As the saving rates in Countries 1 and 2, respectively, dˉ1=dˉ2\bar { d } _ { 1 } = \bar { d } _ { 2 }
As the depreciation rates in Countries 1 and 2, respectively, Aˉ1\bar { A } _ { 1 }
And Aˉ2\bar { A } _ { 2 }
As productivity in Countries 1 and 2, respectively, and the production function per worker is yt=AˉKˉt1/3y _ { t } = \bar { A } \bar { K } _ { t } ^ { 1 / 3 }
In both countries, the Solow model predicts the ratio of GDP per worker in Country 1 relative to Country 2 is:


A) y1y2=(Aˉ1Aˉ2) 3/2×(sˉ1sˉ2) 1/2\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } } \right) ^ { 3 / 2 } \times \left( \frac { \bar { s } _ { 1 } } { \bar { s } _ { 2 } } \right) ^ { 1 / 2 }
B) y1y2=(dˉ1d2) 3/2×(sˉ1sˉ2) 1/2\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { d } _ { 1 } } { \overline { d _ { 2 } } } \right) ^ { 3 / 2 } \times \left( \frac { \bar { s } _ { 1 } } { \bar { s } _ { 2 } } \right) ^ { 1 / 2 }
C) y1y2=(sˉ1sˉ2) 3/2×(Aˉ1Aˉ2) 1/3\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { s } _ { 1 } } { \bar { s } _ { 2 } } \right) ^ { 3 / 2 } \times \left( \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } } \right) ^ { 1 / 3 }
D) y1y2=(dˉ1dˉ2) 3/2\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { d } _ { 1 } } { \bar { d } _ { 2 } } \right) ^ { 3 / 2 }
E) y1y2=(sˉ1sˉ2) 1/2\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { s } _ { 1 } } { \bar { s } _ { 2 } } \right) ^ { 1 / 2 }

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