The same size decrease in the amount of capital stock per worker will cause output per worker to fall by more in a country with a relatively high level of capital per worker than in a country with a relatively low level of capital per worker.

Question

Quizplus · Accepted Answer

According to the principle of diminishing returns in economics, in a country with a relatively low level of capital per worker, a decrease in the amount of capital stock per worker will have a more significant impact on output per worker because when capital per worker is initially low, it is more productive. Conversely, in a country with a high level of capital per worker, the impact of a decrease in capital stock per worker on output per worker is less pronounced due to the diminishing marginal productivity of capital.

The Same Size Decrease in the Amount of Capital Stock