Because of its effect on the amount of capital per worker, in the short term an
ID: 1259013 • Letter: B
Question
Because of its effect on the amount of capital per worker, in the short term an increase in the working population is likely to
a. reduce productivity. Other things the same, this decrease will be larger in a rich country.
b. reduce productivity. Other things the same, this decrease will be larger in a poor country.
c. raise productivity. Other things the same, this increase will be larger in a poor country.
d. raise productivity. Other things the same, this increase will be larger in a rich country.
Explanation / Answer
The answer is “b”.
In the short-term capital can’t be increased. It creates problem to poor countries, since they don’t have enough capital in hand. Therefore, increase in working population creates pressure on capital which turns into reduction in productivity. Since rich countries has enough capital in short-term too, the problem is limited there.