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:

Cognitive-Behavioral

Referring to a psychotherapeutic approach that addresses dysfunctional emotions, behaviors, and cognitions through a goal-oriented, systematic procedure.

Short-Term

pertaining to or lasting for only a limited period of time; often contrasted with long-term.

Cognitive-Behavior Therapy

A therapeutic approach that aims to change negative patterns of thinking or behavior that contribute to an individual's struggles.

Maladaptive Behaviors

Actions or tendencies that are counterproductive to one's own welfare and may impede adjustment, personal growth, or functioning.