Question

Explain why converging economies may present a strong argument for limiting flows of capital but not for limiting trade.

Short answer

Converging economies have strong argument for limiting flows of capital but not for limiting trade.

Step-by-step solution

Step 1. Meaning of Converging economies.

It refers to the state whereby two or more economies strive to reach or achieve the same level of wealth and development. It is the hypothesis that argues that per capita incomes of poor economies will grow at a higher rate than the rich economies. Therefore, economies are supposed to converge in per capita income terms.

Step 2. Explanation 

Converging economies present a strong argument for limiting flows of capital but not for limiting trade because:-

a) Converging economies tried to limit flows of capital so that it would not results in huge budget deficit whereas converging economies don't limiting trade because of the fact that the exports and imports of goods results into technology enhancement.