1.Check all the conditions below that are offered as explanations for why we mig

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.

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countries will all end up using a single currency

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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.

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3.

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

4.

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

East Asian tigers

5.

Economic convergence is the idea that:

b.

Explanation / Answer

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).

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