Final answer:
Investing in human capital goods, such as education, generally leads to an increased standard of living by creating a more skilled workforce and driving economic growth.
Step-by-step explanation:
If a country has revenue from oil and decides to invest in human capital goods, such as education, it is likely to increase the country's standard of living. Investment in human capital tends to lead to a more educated and skilled workforce, which can drive higher rates of economic growth. This is especially true for low-income nations where there is greater potential for substantial gains in productivity and growth from such investments. The United States, as a high-income country, may see diminishing returns from additional investment in human capital; however, the enhancement of skills and education still contributes to economic development, albeit with a smaller marginal gain compared to low-income countries.
Implementing investments in human capital along with improvements in physical capital and technology creates the fundamentals for growth in a market-oriented economy. While high-income countries often focus on developing new technologies, low and middle-income countries can make significant strides in their economic status by investing in human capital and connecting more with global markets and technology.
The concept of diminishing marginal returns suggests that as an economy increases its level of human capital, the additional gains on economic growth will decrease. This means that the impact of education on economic output may be larger in developing countries than in developed countries. However, any positive investment in human capital is likely to contribute to an improved standard of living.