Refer to Table 19-12. Consider the following data on nominal GDP ...

[Frost2351]

Refer to Table 19-12. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is
 
  A) 2013. B) 2014. C) 2015. D) 2016.

Question 2

Using the points on the diagram below, identify which combinations of these points illustrate diminishing returns to capital. Give a brief explanation to support your answer.
 
  What will be an ideal response?

[bblaney]

Answer to Question 1

B

Answer to Question 2

The movement from A to B to C illustrates diminishing returns to capital in the diagram. When technology is held constant, equal increases in capital per hour lead to diminishing increases in output per hour. Technology is held constant by moving along a given production function diagram. Capital per hour increases by 10,000 per worker in the movement from A to B and from B to C. The movement from A to B increases output per worker by 1,000. The movement from B to C increases output per worker by 400. Clearly, the additions to output are diminishing.