The Soviet Union consistently increased the amount of capital available to its workers,but found that increases in capital resulted in progressively smaller and smaller increases in GDP per worker.This phenomenon is referred to as
A)a rising standard of living.
B)diminishing returns to capital.
C)new growth theory.
D)a shift of the per-worker production function.

Question

Quizplus · Accepted Answer

Diminishing returns to capital refers to the fact that as more capital is added, the increase in output or productivity becomes smaller and smaller. This is likely the reason why increases in capital investment in the Soviet Union resulted in progressively smaller increases in GDP per worker. The other choices are not applicable in this scenario: A is a result of rising income, not capital; C is a theory about innovation's role in economic growth; and D refers to a shift in the entire production function rather than the diminishing returns of a single input.

The Soviet Union Consistently Increased the Amount of Capital Available