Question

how would you define convergence? a. tendency for gaps between industrial countries' per-capital incomes to narrow b. tendency for gaps between all countries' per-capital incomes to narrow c. the theory that a crisis in a low-income country will spread to all countries, regardless of debt structure d. the theory that a crisis in a low-income country will spread to only those countries which had lent money to the original country e. tendency for the world distribution of income to be persistently unequal

Answer 1

Convergence refers to the process where countries with lower GDP per capita catch up to countries with higher GDP per capita. This can happen through investment in physical and human capital. The growth rate may be slower in high-income countries due to diminishing returns while low-income countries have a chance for convergent growth.

Step-by-step explanation:

Convergence refers to the process by which countries with lower levels of GDP per capita catch up to countries with higher levels of GDP per capita. This can happen when both high-income and low-income countries invest in physical and human capital to grow their economies. However, the impact of such investments may be greater in low-income countries because they start at a lower base. The growth rate of high-income countries may slow down due to diminishing returns on investment, while low-income countries have a chance for convergent growth.

For example, if a high-income country grows at a rate of 2% annually and a low-income country grows at a rate of 7% annually, convergent growth can occur. After a certain period, the gap between the GDP per capita of the two countries narrows. However, convergence may proceed slowly due to factors such as diminishing returns and reduced opportunities for catch-up growth as the poorer country catches up to the richer country.