Which statement best defines the catch-up effect?
A) It is the idea that saving will always "catch up" with investment spending.
B) It is the idea that it is easier for a country to grow fast and "catch up" with richer countries if it starts out relatively poor.
C) It is the idea that rich countries aid relatively poor countries so as to help them "catch up."
D) It is the idea that if investment spending is low, increased saving will help investment to "catch up."

Question

Quizplus · Accepted Answer

The catch-up effect refers to the idea that it is easier for a country to grow faster and "catch up" with richer countries if it starts out relatively poor. This is because poorer countries have more room for growth and improvement, as they can adopt and adapt already established technologies and methods used by richer countries. This catch-up effect can be seen in countries such as China and India that have experienced rapid economic growth in recent decades.

Which Statement Best Defines the Catch-Up Effect