Question

1.Check all the conditions below that are offered as explanations for why we might expect countries' real GDP per capita to converge, i.e. low income countries to catch up to higher income countries.

<	low income countries can "borrow" technology that has already been developmed

<	international travel is allowed

<	countries will all end up using a single currency

<	higher income countries will buy goods from lower income countries

<	law of diminishing returns means that countries with lower levels of human and physical capital get more out of an addition unit of capital than countries with higher levels of human and physical capital.

<	low income countries can learn from the experience of higher income countries

2.

Check all of the conditions below that are offered as explanations for why we might NOT expect countries' real GDP per capita to converge.

<	indistrialized economies are continually increasing their technology

<

war

<	low income countries may not have sufficient human capital and other infrastructure to borrow technology from more industrialized countries.

3.

In _____________________________, firms and workers often build upon or copy technologies and industries developed by the technology leaders.

a.	China and India's converging economies

b.	Eastern Europe's disconnected economy

c.	the Middle East's low-income economies

d.	South Africa's developing economy

4.

What name was given to South Korea, Thailand, Malaysia, Indonesia, Singapore, Hong Kong and Taiwan because of their economic success?

a.

Tigers

b.	West Asian tigers

c.	Asian tigers

d.

East Asian tigers

5.

Economic convergence is the idea that:

a	more industrialized countries will eventually take over less industrialized countries.

b.	all countries' growth rates will become equal

c.	countries adopt one another's ideas.

d.	countries with lower real GDP per capita will experience growth rates that will allow them to reach the real GDP per capita levels of higher income countries.

Answer 1

Question 1

Convergence theory in economics states that economic growth in low-income countries will exceed the economic growth in high-income countries and eventually, overtime, all countries will converge to similar level of per capita income.

This theory is based on following assumptions -

1. Application of law of diminishing returns - Law of diminishing returns, in this case, means that countries with lower levels of human and physical capital get more out of an addition unit of capital than countries with higher levels of human and physical capital.

2. Low income countries can "borrow" technology that has already been developed.

3. Low income countries can learn from the experience of higher income countries.

Hence, the correct answer is the option (1), (5), and (6).