With the use of the Solow Growth Model, answer the following questions

| November 24, 2016

With the use of the Solow Growth Model, answer the following questions:

Suppose U.S. and China are two countries that only differ in the starting level of K (with everything else being the same – N, saving rate, population growth rate and so on). Will both countries end up at the same steady state of income, consumption and capital-labor ratio? Why?

Now suppose that in addition to beginning level of K being different, saving rates of the countries are also different, will both countries end up at the same level of standard of living? Why?

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