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Business, 18.03.2020 02:58 julissav28346

Assume that two countries both have the per-worker production function y = k 1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital–labour ratio of 4 and B starts out with a capital–labour ratio of 2, in the long run:

A) both A and B will have capital–labour ratios of 4.

B) both A and B will have capital–labour ratios of 16.

C) A's capital–labour ratio will be 4 whereas B's will be 16.

D) A's capital–labour ratio will be 16 whereas B's will be 4.

The answer is C, but please show all work and explain steps so it is clear. Thank you

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