Answer to Question #117789 in Macroeconomics for Karan Bhanot

Question

Which are the reasons why developing economies and developed economies are converging more? Explain

Answer 1

The main reason is that money should work. Therefore, developed countries need somewhere to put in excess capital and they invest in developing countries, and developing countries need investments in the form of cash inflows from developed countries. It turns out a tandem of two in need of each other.