In the context of the neoclassical growth model,which of the following does NOT explain the growth rates of countries which are initially poor?
A)nations which are below their steady-state growth paths will grow more slowly until they reach the steady state
B)the rate of return is higher in poor countries
C)capital flows from rich countries to poor countries
D)the passage of time allows poor countries to adopt the productive techniques of rich countries.

Question

Quizplus · Accepted Answer

A) is incorrect because, according to the neoclassical growth model, nations below their steady-state growth paths are expected to grow faster, not more slowly, due to the catch-up effect or convergence theory. This theory suggests that poorer countries have the potential to grow at a faster rate than richer countries because they can adopt existing technologies and practices, thus allowing them to catch up.

In the Context of the Neoclassical Growth Model,which of the Following