b. as the stock of capital is increased, the extra output produced from an additional unit of

capital falls

c. as resources are used to produce capital goods, fewer additional capital goods can be

produced

d. you always get what you pay for

ANSWER: B

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7. Compared with richer countries, poorer countries are generally characterized by a. high real GDP per person

b. political stability

c. rapid population growth

d. strongly enforced property rights

ANSWER: C

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8. Which one of the following countries would most likely be considered a poorer nation, using real GDP/person? a. Canada

b. Germany

c. Japan

d. India

ANSWER: D

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9. Which of the following factors would be most likely to encourage capital formation in a poorer nation?

a. the expectation of sustained high rates of inflation in the future

b. the expectation that property rights will remain secure

c. the expectation that a struggle between capitalist and socialist forces will lead to major

structural change in the economy

d. an increase in corporate taxes in order to finance an expanded government welfare

program

ANSWER: B

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