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According to the Convergence Hypothesis, Differences in GDP Per Capita

question 78

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According to the convergence hypothesis, differences in GDP per capita among countries tend to narrow over time because countries that start with a lower real GDP per capita tend to have negative growth rates.


Definitions:

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and the present value of cash outflows.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in the context of evaluating investment opportunities.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital wherein each category of capital is proportionately weighted.

Risk Similarity

The degree to which different investments share similar risk characteristics.

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