Economic growth will A. not be affected because the key to economic growth is capital accumulation whether there are diminishing returns or not. B. be faster if more capital per hour is used because of increasing returns to capital. C. slow down or stop if more capital per hour is used because of diminishing returns to capital. D. not be sustained if developing countries stop accumulating capital because of diminishing returns to capital.

Question

Rogelio Allen

Business

12 June, 20:53

Economic growth will A. not be affected because the key to economic growth is capital accumulation whether there are diminishing returns or not. B. be faster if more capital per hour is used because of increasing returns to capital. C. slow down or stop if more capital per hour is used because of diminishing returns to capital. D. not be sustained if developing countries stop accumulating capital because of diminishing returns to capital.

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Answers (1)

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Belen Arroyo · Answer 1

The correct answer is (C)

Explanation:

Labour productivity is an important factor which leads to high economic growth rate. Similarly, if labour is employed for more working hours there comes a time when labour productivity starts to diminish which leads to slow economic growth rate. The technology is a factor that can push the economy to a certain limit even with long labour working hours.