Which of the following 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 notion that it is easier for a country to experience faster economic growth if it starts out relatively poor. This is because the country can adopt the technologies and institutions that have already been developed by richer countries, rather than having to develop them from scratch. This leads to faster growth rates initially, which can allow the country to "catch up" with the richer ones.

Which of the Following Best Defines the Catch-Up Effect