As More Units of Capital Are Added in the Solow

question 174

Multiple Choice

As more units of capital are added in the Solow model, the marginal product of capital:

• A) increases.
• B) decreases at first, then increases.
• C) decreases.
• D) remains constant.

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Definitions:

Monetarists

Economists who theorize that alterations in the money supply have a major influence on the national output in the short run and affect price levels over more prolonged periods.

Rational Expectationists

Economists who argue that individuals make decisions based on their rational outlook, available information, and past experiences.

International Capital Flows

The movement of money for the purpose of investment, trade, or business production across international borders.

Central Bank

A bank whose chief function is the control of the nation’s money supply.