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    Diminishing returns

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    1. Between 1968 and 1980, the US economy experienced a slowdown in productivity growth. However, since the mid 1980s, the economy has experienced increases in the growth rate in productivity. Can you give reasons why US productivity growth started to increase during the late 1980s and continued throughout the decade of the 1990s?

    2. Due to the presence of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _______.
    decrease output by less than a factor of two
    increase output by less than a factor of two
    increase output by exactly a factor of two
    increase output by more than a factor of two

    3. Economies with higher growth rates tend to be those that _______.
    have large amounts of natural resources
    have a stable government that protects property rights
    have high levels of government regulation
    have all of the above

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    Solution Preview

    1. The best explanation for the productivity growth of the 1980s and 90s was the widespread use of computers that began in the period, starting from big businesses and government to our day to day lives. As computers ...

    Solution Summary

    Diminishing returns are defined.