Assuming diminishing returns, A. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. B. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. C. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. D. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones.

Question

Business

Kenzie Mcclain

9 October, 15:32

Assuming diminishing returns, A. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. B. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. C. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. D. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones.

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Answers (1)

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Miles Villa · Answer 1

The correct answer is option D.

Explanation:

Diminishing returns implies that as the quantity of variable input is increased the marginal product goes on declining. When variable inputs are increased, the increased inputs are employed with the same amount of fixed inputs, this causes the output to increase at a decreasing rate.

When the saving rate is increased, the quantity of loanable funds will increase. This will lead to an increase in investment. Consequently, more inputs are employed. Because of diminishing returns, the increase in inputs will cause the output to increase at a decreasing rate. Keeping other things the same, poor countries should grow faster than rich ones.