If There Are Decreasing Returns to the Ideas Stock in the Knowledge

question 48

Multiple Choice

If there are decreasing returns to the ideas stock in the knowledge sector the Romer model:

• A) cannot explain sustained growth
• B) can explain an economy that reaches its steady state
• C) can explain sustained growth
• D) cannot explain why economies' saving rates differ
• E) cannot explain why the output sector exhibits decreasing returns

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Definitions:

Price Elasticity

An indicator of the degree to which the demand for a product is affected by fluctuations in its price, showing how sensitive buyers are to variations in cost.

Monet Paintings

Works of art created by Claude Monet, a founder of French Impressionist painting, characterized by their impression of the landscape or scenes, focusing on the effects of light and color.

Perfectly Inelastic

A demand scenario where the quantity demanded does not change regardless of price fluctuations.

Income Elasticity

A measure of how much the demand for a good changes in response to a change in consumers' income.