Economic growth theory predicts that poor countries will
A)never be able to catch up with rich countries.
B)not be able to catch up with rich countries because rich countries will always have a higher growth potential than poor countries.
C)be able to catch up with rich countries because the existing level of low productivity in poor countries attracts investment.
D)never be able to catch up with rich countries because the existing level of low productivity in poor countries deters investment.
E)be able to catch up with rich countries because rich countries will run out of investment opportunities and will be forced to rely on investment opportunities in the poor countries.

Question

Quizplus · Accepted Answer

Economic growth theory, particularly the theory of convergence, holds that poor countries will eventually catch up with rich countries because the existing level of low productivity in poor countries attracts investment. This investment, in turn, leads to an increase in the capital stock and productivity, which results in economic growth. Therefore, choice C is the best answer.

Economic Growth Theory Predicts That Poor Countries Will