The Convergence Hypothesis of the Solow Growth Model Does Not

question 3

Multiple Choice

The convergence hypothesis of the Solow growth model does not state that

• A) over time, gaps in per-capita income will narrow.
• B) growth rates will be equal once steady states are achieved.
• C) poorer countries eventually will catch up to richer countries.
• D) before reaching their steady states, countries will grow at different rates.
• E) most differences in growth rates are attributable to political misbehavior.

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Definitions:

Supernormal Growth Model

A model that predicts a period of exceptionally high growth rates for a company before settling down to a stable growth rate.

Preferred Stock

A type of stock that provides a specific dividend that is paid before any dividends are paid to common stockholders, often with no voting rights.

Zero Growth

refers to a situation where a company or economy is not experiencing any increase in its output, sales, or other financial indicators over a period.