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Up6
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.
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Up0
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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