Question

Economic growth will A. not be sustained if developing countries stop accumulating capital because of diminishing 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. be faster if more capital per hour is used because of increasing returns to capital.

Answer 1

Option (B) is correct.

Step-by-step explanation:

Economic growth is defined as an increase in the production or output of goods and services in an economy from one period to another period. According to the principle of diminishing returns to capital, if more capital employed in the production of certain goods and services and other factors of production remains the same then as a result per unit of output goes on diminishing.

Hence, this change in the production level slows down the economic growth or even stop the economic growth of a nation.