Economic Growth Is an Exponential Process

question 45

Multiple Choice

Economic growth is an exponential process. What does this mean?

• A) It means that the returns to huge capital investments made today will diminish at an increasing rate over time.
• B) It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time.
• C) It means that countries must allocate increasing amounts of resources to capital goods to see constant increases in the growth rate of potential output.
• D) It means that if a country allocates a fixed amount of resources to capital goods, its potential output will increase at an increasing rate over long periods of time.