The traditional view of the production process is that capital is subject to

A. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

B. diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

C. increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

D. increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

Question

Business

Aliza Estes

19 September, 13:22

The traditional view of the production process is that capital is subject to

A. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

B. diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

C. increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

D. increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

+4

Answers (2)

Know the Answer?

Morgan Blackburn · Answer 1

The correct option is A

Explanation:

Option A is true because it is an implication of the diminishing returns as indicated by the catch-up effect.

Option B is not true as the rate of growth for the initially poor countries is higher than that of rich countries.

Option C is not true as the traditional concept is by diminishing the returns, not by increasing returns.

Option D is not true as the traditional concept is by diminishing the returns, not by increasing returns.

Brit · Answer 2

A. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

Explanation:

The phenomenon of declining contributions to capital has a significant underlying assumption:

whether it begins relatively poor, other things being equal, it would be easier for a country to grow rapidly.

Such impact on the subsequent growth from the initial conditions is called the catch-up effect.