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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