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Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

A. Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate.
B. Other things equal, the more capital goods a nation produces, the greater will be its future growth rate.
C. There is no general relationship between the current division of output between consumer and capital goods and the future growth rate.
D. None of these statements are correct.

User Ezward
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1 Answer

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Final answer:

The most accurate statement for a nation focusing on the production mix of consumer and capital goods is that more production of capital goods, with all else being equal, results in greater potential for future economic growth. Capital goods increase productive capacity, leading to long-term benefits for the economy.

Step-by-step explanation:

The correct answer to the question regarding the relationship between production of consumer goods and capital goods and the future growth rate of a nation is option B: Other things equal, the more capital goods a nation produces, the greater will be its future growth rate. This statement is based on the economic principle that capital goods, such as machinery and equipment, contribute to the productive capacity of the nation, leading to growth in the economy over time. On the contrary, focusing solely on consumer goods may temporarily satisfy current consumption but does not invest in the future productive capabilities of the nation. It is important for a country to balance the production of consumer goods, which provide immediate well-being, and capital goods, which contribute to long-term economic growth and development.

Economic growth is a significant goal for nations as it can raise the standard of living and expand consumption of goods. Economies that operate efficiently on the production possibilities frontier can produce more overall, and as resources such as labor and capital increase, the frontier shifts outward, signifying economic expansion and the ability for society to afford more goods of all types.

User Bakercp
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