Refer to the Following Figure When Answering the Following Questions

question 79

Multiple Choice

Refer to the following figure when answering the following questions.
Figure 5.1: Solow Diagram
-In Figure 5.1, if the economy begins with the initial capital stock at K₃, the capital stock will ________ and the economy will ________.

• A) increase; grow
• B) decrease; shrink
• C) stay constant; be in its steady state
• D) decrease; be in its steady state
• E) stay constant; shrink

---

Definitions:

Creative Federalism

A form of federalism prevalent in the 1960s where the federal government determined the needs of the states and provided services, often leading to an expansion of federal government powers.

Federal Grants

Financial aid or resources provided by the federal government to states, organizations, or individuals for specific projects or purposes.

Block Grant

A grant from a central government that a local authority can allocate to a wide range of services.

Categorical Grant

A type of federal aid given to state and local governments with strict limitations on how the money can be spent, usually tied to specific programs or projects.