Suppose That There Are Diminishing Returns to Capital

question 154

Multiple Choice

Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital, and so less real GDP per person, than the other. Suppose that the saving rate in both countries increases from 5 percent to 6 percent. What would we expect over the next 10 years?

• A) The growth rate will not change in either country.
• B) The country with less capital will grow faster.
• C) The country with more capital will grow faster.
• D) Both countries will grow at the same rate.

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Definitions:

Rudolfo "Corky" Gonzáles

A prominent Chicano activist and leader in the 1960s, known for his involvement in the civil rights movement and advocating for the rights and empowerment of Mexican Americans.

Puerto Rican Nationalists

Puerto Rican Nationalists are members of a political movement in Puerto Rico that advocates for the national sovereignty and independence of Puerto Rico from the United States.

New York

A state in the northeastern United States, known for its cultural, financial, and commercial impact; home to New York City, one of the world's major cities.

United States Mainland

The continental part of the United States, excluding Alaska, Hawaii, and other offshore territories.