quanda25 - Chapter 25 1. a. Which country is richest? How...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 25 1. a. Which country is richest? How do you know? Answer: Northcountry, because it has the largest real GDP per person. b. Which country is advancing most quickly? How do you know? Answer: Eastcountry, because it has the largest growth rate. c. Which country would probably see the greatest benefit from an increase in capital investment? Why? Answer: Westcountry is the poorest and probably has the least capital. Since capital exhibits diminishing returns, it is most productive when it is relatively scarce. d. Referring to (c): Would this country continue to see the same degree of benefits from an increase in capital investment forever? Why? Answer: No. Because of diminishing returns to capital, the additional growth from increasing capital declines as a country has more capital. e. Referring to (d): Why might investment in human capital and research and development fail to exhibit the same degree of diminishing returns
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This note was uploaded on 07/06/2009 for the course BUS BAM303 taught by Professor Na during the Spring '09 term at 東京大学.

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quanda25 - Chapter 25 1. a. Which country is richest? How...

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