Since 1980,growth rates in China have exceeded growth rates in the United States.Based on this information,the Solow growth model would predict that
A) the United States will always be wealthier than China.
B) China's wealth will eventually surpass the wealth of the United States.
C) growth in China will slow down as its level of wealth approaches that of the United States.
D) the two countries will never converge to the same level of wealth.
E) the United States is in a steady state but China is not.

Question

Quizplus · Accepted Answer

The Solow growth model predicts that as a country's capital stock approaches the steady state level, growth rates will slow down until they reach a long-term steady state level. Therefore, as China's level of wealth approaches that of the United States, its growth rates will slow down until they converge to the same level. Therefore, option C is the most plausible prediction based on the information provided.

Since 1980,growth Rates in China Have Exceeded Growth Rates in the United