- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 11. Economic Growth and the Investment Decision
- Subject 5. Theories of Growth

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**CFA Practice Question**

If they have the same saving rate, population growth rate and production function, developing countries will eventually catch up with the developed countries. This is referred to as:

A. absolute convergence.

B. relative convergence.

C. conditional convergence.

**Explanation:**When this happens, the neoclassical theory predicts both output level per capita and growth rates per capita will be the same between developing and developed countries.

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**User Contributed Comments**
1

User |
Comment |
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SMcalister |
Absolute convergence states it'll happen regardless overtime. Conditional convergence puts out a few rules. Savings rates, population growth and production functions need to be the same. |