Question

The economic growth model predicts that the
A. rich countries will have stagnant growth and will catch up with the poor​ countries, so that there will be a convergence toward a​ "poverty trap."
B. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations.
C. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations.
D. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries.

Answer 1

Answer: B

Explanation: The economic growth theory that predicts convergence of developing countries with developed countries is known as the Neoclassical Growth Theory developed by Robert Solow.

One of the conclusions of the Neoclsssical Growth Model is that because capital is scarce in developing countries, it would have a high marginal productivity and higher rates of savings would result. Hence the growth rates of developing countries should exceed that of developed countries.

Because of the higher growth rate of developing countries, there ought to be a convergence between the per capita income of developing countries and developed countries.

I hope my answer helps.

Goodluck