Less-developed countries that nonetheless have access to the latest technologies must be suffering from a relative shortage of ________ according to the Solow growth model,implying a very ________ rate of return available on additions to capital in those countries.
A)capital,low
B)capital,high
C)labor,low
D)labor,high

Question

Quizplus · Accepted Answer

According to the Solow growth model, less-developed countries with access to the latest technologies but still lagging behind are likely suffering from a shortage of capital. This implies a very high rate of return on additional investments in capital, as the model suggests that the marginal productivity of an input (in this case, capital) is inversely related to its abundance.

Less-Developed Countries That Nonetheless Have Access to the Latest Technologies