Question

States. Use the graphical analysis of "present goods" versus "future goods" to explain the difference between China's growth rate and the U.S. growth rate. Households in China save 40 percent of their annual incomes each year, whereas U.S. households bilities are growing at roughly 9 percent per year in China but only about 3.5 percent in the United Production Possibilities (China) Production Possibilities (United States) 100 100 PPC go ppc 70 60 ppc 50 PPC, 70 50 F 40 40 F 30B 20 10 10 0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 70 80 90 100

Answer 1

U.S households saves less than 5% annually. So, they will have more goods in present and less goods in future. Combination A represent more present good and less present good. So, point A represents the combination of present and future goods in the united states. Production possibility growing at 3.5% in united states. PPC_2 best represent the growth in united states. Chinas's house hold saves 40% annually, so they will have less present good and more future goods. Combination B represent more future goods and less present good. So, point B represents the combination of present and future goods in the china. Production possibility growing at 9% in the china. PPC_3 best represent the growth in china.