The catch-up effect is most closely linked to the idea that:[Fill in the blank]

Question

BlackTom AI · Accepted Answer

Capital is subject to diminishing returns, so poorer countries (with less capital per worker) can grow faster than richer ones when they adopt similar technology — this is the catch-up effect.

Relevant concepts:
- Solow growth model and catch-up (convergence) idea.
- Diminishing marginal product of capital: each extra unit of capital adds less output when capital per worker is already high.
- Production function example: y = f(k) with 0 < α < 1 for f(k) = k^α.

Step-by-step reasoning:
1. Define catch-up effect: economies with lower initial income per capita tend to grow faster than richer economies, allowing them to “catch up” if they share the same fundamentals (technology, savings rates, institutions).
2. Link to diminishing returns: assume f(k) = k^α. Marginal product of capital is f′(k) = α k^(α−1). Because α − 1 < 0, f′(k) falls as k rises — i.e., diminishing returns.
3. Implication: a poor country has low k, so f′(k) is large. A given investment (Δk) raises output per worker more in the poor country than in a rich country with high k. Thus, poor countries can grow faster and close the gap.
4. Therefore the catch-up effect rests on diminishing returns to capital: higher returns to new capital where capital is scarce.

Why other options are wrong:
- b. Inflation reduces long-run growth: in standard models nominal variables like inflation are neutral in the long run; inflation may distort but is not the core mechanism behind catch-up.
- c. Government spending always increases GDP: false — effects depend on crowding out, efficiency, and financing; it’s not the catch-up mechanism.
- d. Unemployment falls automatically: unemployment dynamics are not the basis of catch-up and don’t guarantee automatic decline.

Conclusion: The correct answer is a. Capital is subject to diminishing returns, which explains the catch-up effect.

The catch-up effect is most closely linked to the idea that:[Fill in the blank]单项选择题

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