Question

The economic growth model predicts that the

Answer 1

Answer: B

Explanation: The economic growth theory that predicts convergence of developing countries with developed countries is known as the Neoclassical Growth Theory developed by Robert Solow.

One of the conclusions of the Neoclsssical Growth Model is that because capital is scarce in developing countries, it would have a high marginal productivity and higher rates of savings would result. Hence the growth rates of developing countries should exceed that of developed countries.

Because of the higher growth rate of developing countries, there ought to be a convergence between the per capita income of developing countries and developed countries.

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