Suppose That There Are Diminishing Returns to Capital

question 16

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.Suppose that both increase their saving rate from 3 percent to 4 percent.In the long run

• A)both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with more capital.
• B)both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with less capital.
• C)both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital.
• D)both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital.

---

Definitions:

Neurons

Specialized cells of the nervous system that transmit information to other neurons, muscles, or gland cells.

Temperature

A measure of the thermal energy within a body or environment, typically expressed in degrees Celsius or Fahrenheit.

Head-sparing

A phenomenon observed during early infancy in which the body prioritizes nutritional resources for brain development, even under conditions of malnutrition or weight loss.

Malnutrition

A condition that results from eating a diet in which one or more nutrients are either not enough or are too much, leading to health problems.