Answer to Question #77513 in Microeconomics for Felix

Question

On average, households in China save 40 percent of their annual income each year, whereas households in Canada save less than 5 percent. Production possibilities are growing at roughly 9 percent annually in China and 3.5 percent in Canada. Use graphical analysis of “present goods” versus “future goods” to explain the differences in growth rates.
Instructions: Refer to the diagram on the left.

Which point best represents the combination of present and future goods in Canada?

Which dashed production possibilities curve best represents future growth in Canada?
Instructions: Refer to the diagram on the right.

Which point best represents the combination of present and future goods in China?

Which dashed production possibilities curve best represents future growth in China?

Answer 1

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