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Unformatted text preview: by the economy to maintain the economy at its current production level. We know that capital wears out and becomes obsolete so that it must eventually be replaced. To maintain the economy at its current production levels, we must produce enough capital to replace what capital wears out. Point A does not allow for the production of enough capital to maintain the economy. Point B produces enough capital to replace what capital wears out, and more to spare. Point B adds to our capital stock and increases the quantity of one of the factors of production, thus allowing the economy additional resources by which to grow....
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- Fall '10