This lesson introduces economic convergence and examines growth patterns across countries and income groups. Comparing growth rates helps us understand why some economies may catch up with wealthier ones.
Economic convergence is a pattern in which lower-income economies grow faster than higher-income economies, potentially narrowing the gap in living standards. Growth rates in this unit refer to growth in real GDP: output adjusted for inflation, so changes better reflect increases in the quantity of goods and services produced.
All flashcards
Economic convergence
A pattern in which lower-income economies grow faster than higher-income economies, potentially narrowing living-standard gaps.
Real GDP growth
Growth in GDP adjusted for inflation, better reflecting changes in the quantity of output.
Advantages of backwardness
The potential for economies to catch up by adopting technologies and practices developed elsewhere.
Capital deepening
Increasing the human and physical capital available per worker.
Food insecurity
Insufficient reliable access to food, which can persist even when total food production is adequate.
Quiz questions
When other inputs are held constant, what does the law of diminishing marginal returns predict about adding more of an input?Answer: Each additional unit eventually adds less output than the previous unit.
Why might an economy with less capital per worker have a catch-up opportunity?Answer: An additional investment may produce a larger marginal increase in output.
What does an improvement in technology allow an economy to do?Answer: Produce more output from a given combination of inputs.
How can institutions affect whether an economy benefits from existing technology?Answer: They can support or hinder investment, learning, and effective technology use.
Why can fast growth leave a lower-income economy substantially poorer than a high-income economy?Answer: A large initial income gap can persist even after years of faster compound growth.
Based on Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, Daniel MacDonald (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.