Suppose That Per Capita Income in Country A,a Developed Country,is

Essay

Suppose that per capita income in country A,a developed country,is $30,000 per year,and per capita income in country B,a developing country,is $5,000 per year.
(A)Why does economic theory predict that country B will eventually catch up with country A?
(B)Suppose country B's income per capita grows at 5 percent and country A's income per capita grows at 1 percent.Using the rule of 72,plot the growth path of income per capita relative to time for each country.Based on this graph,do you think country B will catch up with country A?
(C)Do you think country B will continue to grow at 5 percent?