Question

The catch-up effect refers to the idea that Select one: a. saving will always catch-up with investment spending. b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor. c. population eventually catches-up with increased output. d. if investment spending is low, increased saving will help investment to "catch-up."

Answer 1

Answer:

b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Explanation:

The catch-up effect refers to the idea that it is easier for a country to grow fast and so catch-up if it starts out relatively poor. It is an economic theory that states that poorer economies are likely to grow faster than already established economy and that these poorer economies will eventually be equal with the established economies in terms of per capital income.

Answer 2

Answer:

B

Explanation:

The 'Catch up effect' which is also known the theory of convergence, states that poor or developing economies tend to grow at a fast rate compared to economies with a higher per capita income high levels of per capita income.

The definition above briefly implies that poor nations grow at a fast rate because of higher possibilities of growth and eventual catch up with the richer countries in terms of per capita income such that the divide between the two gets minimized.

Thus, the theory of convergence of incomes is based on the logic of better opportunities of growth available for poor and developing economies which include access to technological knowledge from the developed countries and other economical advancements.