Figure 7-1

question 75

Multiple Choice

Figure 7-1. On the horizontal axis, K/L represents capital (K) per worker (L) . On the vertical axis, Y/L represents output (Y) per worker (L) .

-Refer to Figure 7-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

• A) In the long run, a higher saving rate leads to a higher growth rate of productivity.
• B) In the long run, a higher saving rate leads to a higher growth rate of income.
• C) Returns to capital become increasingly smaller as the amount of capital per worker increases.
• D) All of the above are correct.

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Definitions:

Country Population

The total number of people living within the borders of a specific country at a given time.

Stock Variable

A quantity measured at one specific time, representing a certain amount accumulated up to that time.

Money Supply

The total amount of monetary assets available in an economy at a specific time.

Price Level

A composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year.