Asked by Silvia Sanchez on May 27, 2024

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Refer to Figure 25-2. In what way is the figure relevant to the catch-up effect?

Catch-Up Effect

The theory that poorer economies will tend to grow at a faster rate than wealthier economies and thus converge in terms of income per capita over time.

  • Grasp the concept of the catch-up effect and its implications on economic growth.
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JK
Jasleen Kaur ParmarMay 29, 2024
Final Answer :
The catch-up effect is observed when a relatively poor country with little capital and low productivity starts to experience rapid growth. In such a country, small increases in capital substantially raise workers' productivity and make rapid growth possible. In the figure, the production function is relatively steep for small amounts of capital, and that feature is central to the catch-up effect.