The economic growth model predicts that
A)GDP per capita of rich countries will grow more rapidly than in poor countries.
B)GDP per capita of poor countries will grow more rapidly than in rich countries.
C)Governments must centrally direct the economy for growth to occur.
D)GDP per capita of poor countries will never change.
E)GDP per capita in rich countries grow at an accelerating rate.

Question

Quizplus · Accepted Answer

The economic growth model, particularly the neoclassical growth model, predicts convergence, meaning that GDP per capita in poor countries will grow more rapidly than in rich countries as they catch up. This is based on the assumption of diminishing returns to capital; poorer countries can adopt existing technologies and practices from richer countries, allowing for faster growth.

The Economic Growth Model Predicts That