Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?
A) Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate.
B) Other things equal, the more capital goods a nation produces, the greater will be its future growth rate.
C) There is no general relationship between the current division of output between consumer and capital goods and the future growth rate.
D) None of these statements are correct.

Question

Quizplus · Accepted Answer

The production of capital goods enables a nation to increase its future output and hence grow. The more capital goods produced, the greater will be the future growth rate. The production of consumer goods, on the other hand, has no lasting effect on the growth rate because there is no increase in production capacity. Therefore, statement B is correct. Statements A and C are incorrect.

Which of the Following Statements, If Any, Is Correct for a Nation