If the current capital stock in South Korea is greater than the current capital stock in China, and total factor productivity is the same in both countries, 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, economies with lower initial capital stocks grow faster than those with higher initial capital stocks, assuming total factor productivity is the same. However, both will converge to the same steady state in the long run. Therefore, China will initially grow faster than South Korea, but both will have the same steady state.

If the Current Capital Stock in South Korea Is Greater