Once a country is wealthy ?
Correct answer: D. it may be harder for it to grow quickly because of the diminishing returns to capital
- A. it no longer needs any human capital
- B. capital becomes more productive due to the "catch-up- effect"
- C. none of these answers
- D. it may be harder for it to grow quickly because of the diminishing returns to capital
Explanation
As a country accumulates capital, diminishing returns mean that each additional unit of capital produces a smaller gain in output. Consequently, a wealthy country may find it harder to maintain very rapid growth.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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