When a nation has very little income per person,

Question

a. it is doomed to being relatively poor forever.
b. it must be a small nation.
c. it has the potential to grow relatively quickly due to the "catch-up effect."
d. an increase in capital will likely have little impact on output.
e. none of the above is true.

Answer 1

The most accurate answer is:

c. it has the potential to grow relatively quickly due to the "catch-up effect."

The "catch-up effect" refers to the idea that poorer economies can grow at a faster rate than wealthier ones as they adopt technologies and practices already in place in more developed economies. This potential for quick growth contrasts with the notion that a nation is doomed to be poor forever.