The Convergence Hypothesis of the Solow Growth Model States That

question 33

Multiple Choice

The convergence hypothesis of the Solow growth model states that all of the following will occur except that

• A) over time, gaps in per-capita income among countries will narrow.
• B) the growth rate of GDP per capita should be negatively related to the initial level of GDP per capita.
• C) steady-state growth rates of GDP per capita will be equal among countries.
• D) countries with low levels of income per capita should have higher growth rates.
• E) none of the above.

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Definitions:

Opportunity Cost

The worth of the best alternative given up to make a choice.

Accounting Profit

The financial gain calculated by subtracting total expenses from total revenues, according to standard accounting principles.

Economic Profit

The profit from undertaking an activity after subtracting both the explicit and implicit costs associated with that activity.

Implicit Costs

Expenses that do not involve a direct monetary payment but represent the opportunity cost of using resources owned by the company or individual.