Once a country is wealthy,
A) it no longer needs any human capital.
B) capital becomes more productive due to the "catch-up effect."
C) none of these answers
D) it may be harder for it to grow quickly because of the diminishing returns to capital.
E) it is nearly impossible for it to become relatively poorer.

Question

Quizplus · Accepted Answer

As a country becomes wealthier, it usually experiences diminishing returns to capital. This means that additional investment in capital leads to smaller increases in productivity and economic growth, which can make it harder for the country to continue growing quickly. This does not mean that human capital is no longer necessary, nor does it necessarily mean that the country cannot become relatively poorer. Option B is also a partially true statement, but it is not the best answer as it does not fully capture the potential challenges that can arise from diminishing returns to capital.

Once a Country Is Wealthy