Final answer:
Capital in production processes is characterized by capital deepening, whereby there is an increase in physical and human capital per person.
Step-by-step explanation:
In the context of production processes, capital is often characterized by capital deepening, which refers to the increase in the average level of physical and human capital per person. An aggregate production function demonstrates how economies use various inputs, including human capital, physical capital, and technological advances, to produce outputs typically measured as GDP per capita.
Considering that all economies maintain the same investment to GDP ratio, one could infer that production systems are seeking to enhance their capital to improve labor productivity. In this process, it's essential to note the role of compound growth rate, which highlights the exponential growth over time, similar to compound interest. This growth is critical since small increases in percentage points can have significant effects on a country's income over time.
Furthermore, during the Industrial Revolution, the use of machinery powered by new sources of energy marked a considerable turning point in capital usage, increasing productivity and ultimately shaping the modern economic landscape.
This era was characterized by substantial innovation and the development of infrastructure, all of which contributed substantially to economic growth.
Lastly, the theory of convergence suggests that economies with lower GDP per capita may experience faster growth than their wealthier counterparts, as the effect of new investment in these developing economies might produce more significant gains due to their starting position. Over time, this can lead to a reduction in income disparities between countries.