Relatively small increases in capital investment in developing economies with large populations, such as China in the 1990s, are most likely to produce:A. large percentage increases in real GDP.B. very large percentage increases in GDP per capita growth rates in the long term.C. very large nominal increases in GDP per capita.

The correct answer is A.If an economy has a low output level, then a minor improvement in production has a large percentage impact. To illustrate, if you have a million dollars, presenting you with another dollar has a near-zero impact on your wealth. But, if you have only one dollar and are presented with another dollar, that is a one hundred percent improvement in your wealth. China has a very large population and, in the past, had comparatively little capital.

A CFA Level 1 Discussion About CFA Level 1 Question Of The Week

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  10 Feb 2020 at 9:16 pm
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  The correct answer is A.
  
  If an economy has a low output level, then a minor improvement in production has a large percentage impact. To illustrate, if you have a million dollars, presenting you with another dollar has a near-zero impact on your wealth. But, if you have only one dollar and are presented with another dollar, that is a one hundred percent improvement in your wealth. China has a very large population and, in the past, had comparatively little capital.
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