1. Consider two countries that are otherwise identical (they have the same saving rates and depreciation rates), but the population of Country Large is 100 million, while the population of Country Small is 10 million.

a.	If the population growth rates are the same in the two countries, which country will have a higher capital per worker (ie which will be richer)? Give a brief reason why using a graph or equation.
b.	the population growth rate is higher in Country Large. which country will have a higher capital per worker (ie which will be richer)? Give a brief reason why using a graph or equation.

2. The economy of North and South can be described by the Solow growth model and the following aggregate production function Y=(K)^.5(LE)^.5 . The following are some characteristics of the both economies:

• saving rate (s)=0.20
• depreciation rate (d)=0.12
• population growth rate (n)=0.02

The growth rate of E is .1 in the South and .2 in the North , where E is the techonlogical progress or the skill that augments labor.

1. Calculate the steady state capital per *effective* worker for each country. Remember to either show your work or write the steps that leads to the answer. [2 points]
2. Once you have capital per *effective* worker calculated in a, multiply each effective capital per worker quantity in each country by their own level of E to find capital per worker. Use E_south=100 and E_north=300. The North will have a higher level of E since it is growing at a faster rate. [2 points]
3. Which country will be richer in steady state? (ie have higher equilibrium output per effecttive worker) Explain or calculate. [2 points]
4. Will the poorer catch up to the richer country? Give a brief reason why or use a graph.