Question

Which of the following statement is wrong?

A. Technological progress could yield ways to avoid limits of natural resources.

B. Countries that start off poor tend to grow more rapidly than countries that start off rich.

C. ranking of countries by income can change substantially in the long run only because of 0.3% annual differences in GDP per capita growth rates.

D. Higher saving rate is guaranteed to yield a higher growth rate of real GDP per capita for a modern economy

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If a production function for a certain good is Y =A F (K, H, L, N) has decreasing returns to scale, and all factors of production are essential producing this good, then output can be doubled if (K, H, L, N stand for the quantities of physical capital, human capital, labor, and natural resource; A stands for technology)

A. all of the inputs double.

B. all inputs but labor double.

C. labor alone doubles.

D. None of the above is correct

Answer 1

1)

higher saving does not mean that average real GDP shall rise. Saving and investment are done through two different classes. Hence, motives also tend to be distinct for both groups.

Right Answer is (D)

2)

Returns to scale occurs where all factors of production are variable and changed simultaneously. Decreasing returns to scale implies that increase in inputs would not lead to proportionate rise in output.

Input must be increased more than double.

Right answer is (D)