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Question: solow and conditional convergence...

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Solow and Conditional Convergence

In this section, assume we are in a Solow world where each country has different parameters. We dont know which parameters are different. (1) More true/false and explain: (a) [2 points In country A, the absolute amount of investment is greater each year than in country B. This must mean that B is wealthier than A. (b) [2 points] Suppose we know that A and B will converge to different steady states, but we do not know anything more than that. If we see A growing faster than B, what can we conclude? What other information might allow us to say something more? (2) |3 pointsl Now use these models to structure an understanding of the following sets of facts (i) The U.S. had per-capita income similar to that of Britain in 1800. By 1930, the U.S. per capita (ii) In 1820, German per-capita income was much lower than that of Britain. By the late 1920s, (ii) The U.S. growth has always been low but steady, about 2 percent per year without much Note: there is no one right story to tell about these facts, but there are those that use economic reasoning income was much higher than Britains. German incomes were higher. Today they are about the same again. deviation from that. correctly. Feel free to say what you would need to be precise, and clearly state any assumptions you make.

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