Refer to the Following Figure When Answering

question 63

Multiple Choice

Refer to the following figure when answering
Figure 5.6: Solow Diagram
-Consider Figure 5.6. 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) South Korea will be richer than China, forever
• B) South Korea will initially grow slower, but incomes in China and South Korea will converge
• C) China and South Korea have different steady states
• D) South Korea will initially grow faster, but incomes in China and South Korea will converge
• E) China will initially grow slower, but incomes in China and South Korea will converge

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Definitions:

MRP

Marginal Revenue Product, the additional revenue generated by the employment of one additional unit of a factor of production.

MPP

Marginal Physical Product, the change in total output of a good that results from a one-unit change in input, holding all other inputs constant.

Substituted

The act of replacing one good or service with another due to changes in price, preference, or other variables.

Derived Demand

Demand for a factor of production or intermediate good that occurs as a result of the demand for another related good or service.