Which statement best explains the logic behind the catch-up effect?
A) Workers in countries with low incomes will work more hours than workers in countries with high incomes.
B) The capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital.
C) New capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.
D) Poor countries tend to save a higher share of their income than rich countries.

Question

Quizplus · Accepted Answer

The catch-up effect is based on the idea that new capital investments can have a greater impact on production in countries with less capital. This is because countries with low levels of capital have more room to improve their production levels by investing in new capital, compared to countries that already have a lot of capital. Therefore, (C) is the statement that best explains the logic behind the catch-up effect.

Which Statement Best Explains the Logic Behind the Catch-Up Effect