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Problem Set 2

# Problem Set 2 - time goes Country B has higher investment...

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1. C) Country A Year k y c i dk change in k 1 2.00 1.41 1.27 0.14 0.10 0.04 2 2.04 1.43 1.29 0.14 0.10 0.04 3 2.08 1.44 1.30 0.14 0.10 0.04 4 2.12 1.46 1.31 0.15 0.11 0.04 5 2.16 1.47 1.32 0.15 0.11 0.04 6 2.20 1.48 1.34 0.15 0.11 0.04 7 2.24 1.50 1.35 0.15 0.11 0.04 8 2.28 1.51 1.36 0.15 0.11 0.04 9 2.31 1.52 1.37 0.15 0.12 0.04 10 2.35 1.53 1.38 0.15 0.12 0.04 Country B Year k y c i dk change in k 1 2.00 1.41 1.13 0.28 0.10 0.18 2 2.18 1.48 1.18 0.30 0.11 0.19 3 2.37 1.54 1.23 0.31 0.12 0.19 4 2.56 1.60 1.28 0.32 0.13 0.19 5 2.75 1.66 1.33 0.33 0.14 0.19 6 2.94 1.72 1.37 0.34 0.15 0.20 7 3.14 1.77 1.42 0.35 0.16 0.20 8 3.34 1.83 1.46 0.37 0.17 0.20 9 3.54 1.88 1.50 0.38 0.18 0.20 10 3.74 1.93 1.55 0.39 0.19 0.20 The consumption per worker in Country B was originally lower the Country A yet it increases as
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Unformatted text preview: time goes. Country B has higher investment rate (as you can see in [i]) and that higher investment rate leads to higher consumption rate in the future. In addition, Country B has higher growth in capital per worker. Thus, with higher capital per worker and higher investment rate, Country B has higher ability to consume more goods and services in the future....
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