As a nation approaches its steady state,the returns to capital ________ and the growth of real gross domestic product (GDP)________.
A) increase; increases
B) decrease; slows down
C) increase; slows down
D) decrease; increases
E) remain unchanged; remains unchanged

Question

Quizplus · Accepted Answer

As a nation approaches its steady state, the returns to capital decrease because there are fewer investment opportunities and capital is more abundant. Therefore, the growth of real GDP slows down because there are fewer opportunities for productive investment.

As a Nation Approaches Its Steady State,the Returns to Capital