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Solow Model. Country A has a lower level of GDP per capita than Country B. a) Let's say Countries A and B have the same
Solow Model. Country A has a lower level of GDP per capita than Country B. a) Let's say Countries A and B have the same savings rates and depreciation rate of capital. According to the Solow model, will they eventual converge to the same steady state? Explain briefly. (4 points) b) If Countries A and B have the same savings rate and depreciation rate, which country is growing faster? Explain. (4 points) c) What if, instead, Country A is actually too poor to save and is not able to attract foreign direct investment? What alternative source of funds may help them grow? (4 points)GDP per capita and development a) One concern about GDP per capita has been that it doesn't account for subjective well-being. What is one (of the two ways we discussed) that subjective well-being is measured? (2 points) b) Briefly, what is the overall conclusion of recent research (by Sachs, Stevenson and Wolfers) about the relationship the relationship between GDP per capita and subjective well-being? (4 points)
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