Question 48
Economic Growth and DevelopmentAn increase in an economy's productive capacity implies
- A.an increase in the economy's rate of capital replacement
- B.an increase in the economy's capital stock
- C.a decrease in government spending
- D.an increase in government spending.
Show the answer and explanation
Answer: B (an increase in the economy's capital stock)
Explanation
Productive capacity grows when the economy has more capital goods (machines, roads, factories) to produce with.