Explain Using the Solow Framework Why China's Economic Growth Will

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The Answer is As China moves along the curve below in a rightward direction, three factors kick in:
i. Diminishing returns.
ii. Depreciation on an ever-larger capital stock takes up a larger share of national savings.
iii. Each new birth requires ever more capital also absorbing more savings.

As China moves along the curve below in a rightward direction, three factors kick in: i. Diminishing returns. ii. Depreciation on an ever-larger capital stock takes up a larger share of national savings. iii. Each new birth requires ever more capital also absorbing more savings. These factors, then, tend to slow an economy in terms of output. They are related to a key constraint in any economy: the growth of a key input, the labor force. Short of technological progress, labor force growth will act as a bottleneck which slows GDP growth to the same rate as the assumed rate of growth of the population.

These factors, then, tend to slow an economy in terms of output. They are related to a key constraint in any economy: the growth of a key input, the labor force. Short of technological progress, labor force growth will act as a bottleneck which slows GDP growth to the same rate as the assumed rate of growth of the population.

Explain Using the Solow Framework Why China's Economic Growth Will

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Explain Using the Solow Framework Why China's Economic Growth Will

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Correct Answer:VerifiedShow Answer

Correct Answer:
Verified