Suppose That There Are Diminishing Returns to Capital

question 186

Multiple Choice

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

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

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Definitions:

Waiver

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Supervening Illegality

A situation where a law change after an agreement is made renders the performance of the contract illegal.

Impossibility

A concept in contract law where unanticipated events make the fulfillment of a contract's terms unfeasible or unable to be completed.

Substitute

An alternative or replacement for something else, particularly in the context of products, goods, or services.