Question

Economic growth will A. be faster if more capital per hour is used because of increasing returns to capital. B. slow down or stop if more capital per hour is used because of diminishing returns to capital. C. not be affected because the key to economic growth is capital accumulation whether there are diminishing returns or not. D. not be sustained if developing countries stop accumulating capital because of diminishing returns to capital. Some economies are able to maintain high growth rates despite diminishing returns to capital by using A. better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns. B. a larger proportion of​ capital, thereby making their production capital​ intensive, so the sheer volume of capital protects them from diminishing returns to capital. C. a​ labor-intensive technology because​ labor, unlike​ capital, is not subject to diminishing returns. D. a newer production method​ that, if used​ properly, produces increasing returns to capital.

Answer 1

Answer: B and A

Explanation: Economic growth is the increase in the productive capacity of the economy. There will be a decrease in economic growth if more capital per hour is used as a result of the diminishing returns to capital.

Some economies maintain high growth rates despite diminishing returns to capital through the use of enhanced or better technology, coupled with accumulating​ capital. There are growth in such economies because unlike capital,​ technology is subject to increasing returns.

Answer 2

Answer:

1. D. not be sustained if developing countries stop accumulating capital because of diminishing returns to capital.

2. A. better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns.

Explanation:

Economic growth will not be sustained if developing countries stop accumulating capital because of diminishing returns to capital.

Capital formation and accumulation increases investment which effects economic development or growth in two ways. Firstly, it increases the per capita income and enhances the purchasing power which, in turn, creates more effective demand. Secondly, investment leads to an increase in production.

Some economies are able to maintain high growth rates despite diminishing returns to capital by using A. better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns.

Technological development is an important factor that increases the growth rate of economy at the macro level and profits of the firms at micro level.