to keep pace with capital depreciation. The additional units of physical capital will increase output. 1 Figure 1 This idea can be extended into two or more countries . Assuming two countries with same rate of population growth, technological progress,depreciation rate and saving rate, then the further away an economy is from the steady state value of capital per effective labor, the higher the growth rate of it, i.e., the faster the economy grows. As is shown in figure 2 below, Figure 2 The…
Words 1027 - Pages 5