In a small Asian country,it is estimated that changing the level of capital from $8 million to $12 million will increase real GDP from $4 million to $6 million.What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise to $16 million,assuming no technological change and no change in the hours of work?
A)GDP would increase further,but by less than $2 million.
B)GDP would increase further by exactly $2 million.
C)GDP would increase further by more than $2 million
D)GDP would increase further by exactly $8 million.

Question

Quizplus · Accepted Answer

Based on the given information, increasing capital from $8 million to $12 million increased real GDP by $2 million ($6 million - $4 million). Assuming the same relationship between capital and real GDP holds, increasing capital from $12 million to $16 million would likely result in an increase in real GDP, but by a smaller amount than the previous increase of $2 million. Therefore, choice A is the best answer.

In a Small Asian Country,it Is Estimated That Changing the Level