Classical Growth Theory Argues That When Real GDP Per Person

question 28

Multiple Choice

Classical growth theory argues that when real GDP per person rises above the subsistence level

• A) technological change slows down, stagnating the economy.
• B) population growth increases, driving real GDP per person back to subsistence level.
• C) people don't want to work as much, decreasing labor supply.
• D) the economy enjoys a period of permanent growth.

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Definitions:

Debt-Equity Ratio

A financial ratio portraying the comparative financing approach using debt and equity for assets.

Plowback Ratio

The proportion of earnings that a company retains and reinvests into its operations rather than distributing as dividends.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage.

Operating Capacity

The maximum output or production level that a facility or business can achieve under normal circumstances.