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24 Jun 2018

Why does the economic growth model predict that poor countries should catch up to rich countries in income per capita ? Have poorer countries been catching up ( converging) with richer countries ? Explain and site source.

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Sixta Kovacek
Sixta KovacekLv2
26 Jun 2018

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Related questions

1. Briefly explain why different countries have different standards of living?

2. Explain in detail how savings affect future productivity and standard of living

3. Give an example that illustrates diminishing marginal returns to capital.

4. Explain how diminishing marginal returns to capital property allows poorer countries eventually to catch with rich countries in their standard of living.

5.Explain why natural resources sometimes benefit the country and sometimes make it more difficult for the country to achieve a high standard of living

6. Explain how technological advancement can benefit and hurt the economy at the same time.

This chapter states that most economists would probably maintain that new technologies are the single most important source of productivity improvement, hence, economic growth in general. Which of the following is correct regarding advances in basic science translating into improvements in standards of living?

a)Any scientific improvement will benefit poor countries to the same degree as rich countries, as globalization has allowed all countries to have access to essentially the same basic scientific information at a given time.

b)The impact of new scientific knowledge is usually greater in poor countries where the existing knowledge is much lower, as there is much more opportunity for improvement as compared to rich countries.

c)Poor countries do not benefit from new scientific knowledge to the same degree that rich countries do, since they lack the resources required to apply the knowledge widely in a beneficial way.

d)Economic growth automatically follows from breakthroughs in basic science regardless of an economy’s availability of other resources or its legal and political environment.

Two students, Ryan Wattenberg and Emma Bennett, are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future.

Which of the following, if true, would strengthen Ryan's argument that developing countries will not catch up with developed countries?

a. Most developed countries do not have similar resources endowments.

b. Some of the fastest growing developing countries in the world also score well on many social indicators.

c. Credit creation by the formal banking system in most developing countries has been falling or stagnant in the last five years.

d. High population in developing countries, which for decades acted as a drag on growth, now forms a productive workforce.

e. Most developed countries experienced a high degree of inequality in the initial phases of economic growth.

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