Refer to the following figure when answering the following questions. Figure 5.7: Solow Diagram -Consider Figure 5.7. 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

The principle of transition dynamics suggests that economies further from their steady state (like China with a lower initial capital stock compared to South Korea) will initially grow faster until they reach their steady state, assuming both countries have the same steady state.

Refer to the Following Figure When Answering the Following Questions