Question

Part 3

Analyze the economic discrepancies between countries.

Explain why some countries today are much poorer than other countries.

Based on what you know and have learned about macroeconomic principles, are today's poorer countries destined to always be poorer than today's wealthy countries?

If so, explain why.

If not, explain how today's poorer countries can catch up to or even surpass today's wealthy countries.

Answer 1

World today can be categorized into three part i.e developed Countries having high level of per capita income, well developed infrastructure etc, developing countries like China, India which are still developing through infrastructure development etc, underdeveloped countries which have just started on path if development like African countries.

Some countries are poor because they got freedom quite late and colonisation which served the colonisers destroyed their economy completely. Colonisers developed poor countries economy to their own benefits pushing them back for decades.

No, poor countries are not destined to be poor always this is because there is a concept of convergence such that poor countries will converge towards the developed countries and even surpass them . Thus is because a factor will have diminishing returns after point of time. Poor countries with low level of capital initially will have higher returns to capital and thus higher growth.