Because of the principle of diminishing returns, growth promotion through capital deepening works better in countries that:

Question

Quizplus · Accepted Answer

The principle of diminishing returns states that the marginal benefit of adding more capital decreases as the level of capital stock increases. Therefore, growth promotion through capital deepening works better in countries that have a low capital stock because they are farther away from the point of diminishing returns. Countries with high levels of capital stock (such as those with high real GDP per capita) may already be close to the point of diminishing returns, making additional investments in capital less effective.

Because of the Principle of Diminishing Returns, Growth Promotion Through