Figure 10-3

-The economy will grow from points B to G in Figure 10-3 above over time because
A)per person saving and steady state investment will remain stable at points C and D respectively.
B)per person capital will grow,point D to E since per capita savings exceed steady state investment,point C is greater than point D.
C)per person capital will grow,point D to E since per capita savings is less than steady state investment,point C is greater than point D.
D)per person saving and steady state investment will remain stable at points D and C respectively.

Question

Figure 10-3
 
-The economy will grow from points B to G in Figure 10-3 above over time because
A)per person saving and steady state investment will remain stable at points C and D respectively. 
B)per person capital will grow,point D to E since per capita savings exceed steady state investment,point C is greater than point D. 
C)per person capital will grow,point D to E since per capita savings is less than steady state investment,point C is greater than point D. 
D)per person saving and steady state investment will remain stable at points D and C respectively.

Quizplus · Accepted Answer

According to the Solow model in Figure 10-3, as the economy moves from point B to G over time, per person capital will grow from point D to E because per capita savings exceed steady state investment, point C is greater than point D. Therefore, the correct choice is B.

Figure 10-3 -The Economy Will Grow from Points B to G in B