Other things equal, how do relatively poor countries tend to grow?
A) They grow slower than relatively rich countries; this is called the poverty trap effect.
B) They grow slower than relatively rich countries; this is called the savings effect.
C) They grow faster than relatively rich countries; this is called the catch-up effect.
D) They grow faster than relatively rich countries; this is called the diluting capital effect.

Question

Quizplus · Accepted Answer

Relatively poor countries tend to grow faster than relatively rich countries due to the catch-up effect. This is because poor countries have more opportunities for growth and development, such as the availability of low-cost labor and untapped markets, and they can often adopt new technologies and ideas more easily. As these countries catch up to the level of productivity and income of the richer countries, their growth rates may slow down.

Other Things Equal, How Do Relatively Poor Countries Tend to Grow