The economic growth model predicts that the

A. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations.

B. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations.

C. rich countries will have stagnant growth and will catch up with the poor countries, so that there will be a convergence toward a "poverty trap."

D. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries

Question

Business

Salma Porter

3 May, 17:46

The economic growth model predicts that the

A. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations.

B. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations.

C. rich countries will have stagnant growth and will catch up with the poor countries, so that there will be a convergence toward a "poverty trap."

D. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries

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Answers (1)

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Hallie Cantu · Answer 1

The correct answer is D. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries.

Explanation:

Robert Solow's economic model, also known as the exogenous growth model, states that the growth of an economy should be based on the management of supply, productivity and investment, and not on the exclusive result of demand.

In the literature we can find information about this theory under the name of "neoclassical growth model", a name that may be strange if we do not briefly study the roots that fed this model, but that has a simple explanation.

Through the analysis of Harrod's model from the perspective of the "neoclassical school," the author made several modifications that would gradually formulate a new theoretical construct. In this way, while for Harrod the variations in demand were the fundamental objects to study, they lost all their prominence in Solow's theory.