Suppose two countries initially start off at the same GDP per capita in 1940. After 70 years the countries have large differences in GDP per capita in the year 2010, with one country having $30,000 more than the other country. What is the most likely reason for this large disparity in GDP per capita between the two countries

The contrast in GDP per capital growth relative to productivity growth between the two countries and the effect of compounding decrease

Explanation:

Solution

The GDP growth rate relative productive growth was one of the prime factors of total growth during the late 20th century.

The more technological investment, the higher was the productivity together with compounding could have played a vital role.

By compounding it refers to the reinvestment with the aid of established generated revenue. this implies that capital is used to its fullest thus increasing productivity. thus maybe the country with Low GDP per capital might have experienced a decrease, then compounding further abetting a downturn in the GDP growth rate.

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