... the problem, but nonetheless is a quick fix. Sustained growth occurs in the presence of technological progress. 2. False If all countries are on the same production function and are at the steady state. The differences in output and capital will be due to different savings rate. Country 1 with a low savings rate will be on a lower steady state of capital and output. Rates of return are lower in rich countries than poorer countries. As rich countries approach steady state, as it invests more into capital, there is a lower return in the increase of output as there are diminishing returns. Poorer countries tend to have a large population than rich countries. They also tend to have lower levels of capital per capita than the rich countries. So by increasing the level of capital per capita, you are very likely to see an increase in output. Whereas, giving an extra ...

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