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The Assumption That the Aggregate Production Function Exhibits Decreasing Returns

Question 2

Multiple Choice

The assumption that the aggregate production function exhibits decreasing returns to capital (K) implies that a 5% increase in K will cause:


A) no change in Y/N.
B) a decrease in Y/N.
C) a decrease in K/N.
D) Y to increase by less than 5%.
E) Y to increase by exactly 5%.

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