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:

B. F. Skinner

An American psychologist known for his work in behaviorism and the development of the theory of operant conditioning.

Psychoanalysis

A therapeutic approach developed by Freud, focusing on unconscious motivations and conflicts as the roots of psychological distress.

Positive Outcome

An event or result that is beneficial, favorable, or desirable.

Inherited Traits

Characteristics or features passed down from parents to offspring through genes.