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What is the “catch-up” effect?
The idea that supply increases catch up poor people within a society.
Foreigners cannot catch up to the US productivity so they do not even try.
Poor countries tend to grow more rapidly then rich countries.
Long Run Aggregate Supply cannot catch up to Aggregate Demand during high inflation.
Government has a tendency to lag behind business conditions so Aggregate Supply is horizontal at low price levels to allow Government to catch up.