Refer to the following figure when answering Figure 5.6: Solow Diagram -Consider Figure 5.6. If K_SK is the current capital stock in South Korea and K_CH is the current capital stock in China, according to the principle of transition dynamics: A) China initially will grow faster than South Korea, but each will have the same steady state B) China initially will grow slower than South Korea, but each will have the same steady state C) China initially will grow faster than South Korea and will have a higher steady state D) China initially will grow faster than South Korea and will have a lower steady state E) Both South Korea and China initially will grow at the same rate and have the same steady state

Question

Quizplus · Accepted Answer

According to the principle of transition dynamics, countries with lower initial capital stock (like China) will grow faster than those with higher initial capital stock (like South Korea) until they reach the same steady state.

Refer to the Following Figure When Answering