If the marginal product of capital were increasing in all nations

Question

Quizplus · Accepted Answer

BC: If the marginal product of capital were increasing, it implies that as more capital is accumulated, the additional output produced by an extra unit of capital increases. This would incentivize nations with large capital stocks to invest more, as the returns on investment would be higher.B: Increasing marginal product of capital suggests that adding capital leads to more significant increases in output, which can help in overcoming diminishing returns to capital. This scenario can help avoid poverty traps, as even low-income countries can achieve higher growth rates by accumulating capital, making it easier to escape situations where low income leads to low saving and investment, which in turn leads to low income.

If the Marginal Product of Capital Were Increasing in All