If the current capital stock in South Korea is greater than 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 capital stock tend to grow faster as they catch up to their steady state. Therefore, China, with a lower capital stock, will initially grow faster than South Korea, but both will converge to the same steady state.

If the Current Capital Stock in South Korea Is Greater