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) South Korea will be richer than China, forever B) South Korea will initially grow slower, but incomes in China and South Korea will converge C) China and South Korea have different steady states D) South Korea will initially grow faster, but incomes in China and South Korea will converge E) China will initially grow slower, but incomes in China and South Korea will converge

Question

Quizplus · Accepted Answer

According to the principle of transition dynamics, countries with lower capital stocks tend to grow faster as they catch up to countries with higher capital stocks, leading to income convergence.

Refer to the Following Figure When Answering