5. It rains so much in the country of Tropicana that capital equipme.pdf

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5. It rains so much in the country of Tropicana that capital equipment rusts out (depreciates) at a much faster rate than it does in the country of Sahara. If the countries are otherwise identical, in which country will the Golden Rule level of capital per worker be higher? Illustrate graphically. 6. Two countries, Highland and Lowland, are described by the Solow growth model. Both countries are identical, except that the rate of labor-augmenting technological progress is higher in Highland than in Lowland. A. In which country is the steady-state growth rate of output per effective worker higher? B. In which country is the steady-state growth rate of (total) output higher? C. Does the Solow growth model predict that the two economies will converge to the same steady state?.

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