When a Country Adds More Capital to Its Existing Stock

question 79

Multiple Choice

When a country adds more capital to its existing stock:

• A) the additional productivity is less than the previous increases to productivity.
• B) the additional productivity is greater than the previous increases to productivity.
• C) it experiences rapidly increasing rates of growth.
• D) it experiences rapid declines in its level of income.

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Definitions:

Discounted Payback Rule

A capital budgeting technique that calculates the time required to recoup the cost of an investment, taking into account the time value of money.

Net Present Value

A technique used in finance to determine the value of a series of future cash flows discounted back to their value in today's dollars.

Time Value

The principle that money in hand today is valued higher than the equivalent amount at a future date, owing to its ability to earn more over time.

Cash Flows

The total amount of money being transferred into and out of a business, particularly affecting its liquidity.