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Unformatted text preview: level of consumption in steady state, which of these two countries has a steady state closer to the golden rule steady state? d) Check this conclusion by computing the golden rule level of capital stock, and the saving rate necessary to achieve it. (Use the golden rule condition, that the marginal product of capital will equal the depreciation rate) 2) China’s real per capita GDP has been growing significantly faster than that in the U.S. – China’s growth rate was about 10% over the last year, compared to about 3% for the U.S. a) Using the Solow growth model (with no technological progress), is there reason to believe this disparity in growth rates will disappear in time? What about the disparity in income levels per person? b) How is your conclusion affected if you were told that China has a higher saving rate than the U.S.? c) What if the saving rates are the same, but China has a higher population growth rate?...
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