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.

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, allowing the poor countries to catch up over time. This is based on the assumption of diminishing returns to capital; poorer countries have less capital per worker, so additional capital increases output more than in richer countries.

The Economic Growth Model Predicts That