With free movement of capital internationally, the principle of convergence postulates that:
A) at some future time, external debt and external wealth will cancel each other out.
B) poor nations will finally adopt capitalism and free markets.
C) when the baby-boom generation retires, the investment rate will rise to compensate.
D) rates of return on capital investment will be equalized worldwide as investors seek the highest return.

Question

Quizplus · Accepted Answer

The principle of convergence postulates that rates of return on capital investment will be equalized worldwide as investors seek the highest return, due to the free movement of capital internationally. This is because investors will move their capital to countries where they can potentially earn a higher return on their investment, leading to the convergence of rates of return.

With Free Movement of Capital Internationally, the Principle of Convergence