Question

Initially, the number of tools per worker was higher in Blahnik than in Gribinez. From 2022 to 2062, capital per worker rises by 4 units in each country. The 4-unit change in capital per worker causes productivity in Blahnik to rise by asmaller amount than productivity in Gribinez. This illustrates the ______ effect.

Answer 1

Catch up effect

Step-by-step explanation:

Catch up effect or convergence effect states that when equal resources are allocated to a poor and rich economy the poor economy tends to grow faster than the rich country.

Consider this instance where the number of tools per worker was higher in Blahnik than in Gribinez. So Blahnik was richer.

Capital per worker rose by 4 units in each country, and resulted in smaller increase in productivity in Blahnik compared to Gribinez (that is the poorer country Gribinez was growing faster).

This can be related to the law of diminishing returns where additional units of input will result in lower increase in productivity as production progresses.