Question

On average, households in China save 40 percent of their annual income each year, whereas households in the United States save less than 5 percent. Production possibilities are growing at roughly 9 percent annually in China and 3.5 percent in the United States. Use graphical analysis of "present goods" versus "future goods" to explain the differences in growth rates.

Answer 1

Answer:

The graphs illustrates that China's production possibilities curve is ahead of the United States's production possibilities curve.

China being a much more stable and growing economy as compared to United States, it invests a huge portion in future goods. However, it produces a fewer consumer goods.

United States produces less capital goods as compared to China and it invests more in consumer goods.

Moreover, China's future production possibilities will move more faster than United States.

Explanation: