According to the "New" Theories of Economic Growth,increasing Marginal Returns

question 13

Multiple Choice

According to the "new" theories of economic growth,increasing marginal returns to capital investment is

• A)possible,but only in the early stages of innovation before imitators rush in to drive prices down.
• B)possible after initial fixed costs of innovation have been borne.
• C)possible only if the capital is government-owned infrastructure.
• D)impossible,and is thus a weak source of growth.
• E)impossible because diminishing returns are unavoidable.

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Definitions:

Risk-Return Relationship

The principle that potential return increases with an increase in risk, describing the trade-off between the desire for the lowest possible risk and the highest possible return.

APT

Arbitrage Pricing Theory, a model that predicts the expected return of a financial asset based on its sensitivities to macroeconomic factors.

Risk Premiums

The extra return expected by investors for holding a risky investment instead of a risk-free asset.

Benchmark Market Portfolio

A standard or reference against which the performance of a security, mutual fund, or investment manager can be measured.