If country X has a higher capital per person than country Y, then ________.

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BlackTom AI · Accepted Answer

When comparing per-person income across countries, a higher capital stock per person can support more output, but long-run prosperity is fundamentally tied to productivity, particularly total factor productivity (TFP).
Option 1: 'country X is richer than country Y' This ignores the given premise (X has higher capital per person) and makes a claim about overall wealth without addressing productivity or realized income differences. Capital per person alone does not guarantee X is richer; Y could be more productive and thus catch up or exceed X in income.
Option 2: 'the only way for country X to be richer than country Y is if X is just as productive (has the same TFP) as Y' This statement is too restrictive. If X already has more capital per person, X could be richer even with higher TFP in Y, or even with higher or lower TFP, depending on how capital and productivity interact in output; equality of TFP is not a necessary condition for X to be richer.
Option 3: 'the only way for country Y to be richer than country X is if Y is more productive (has a higher TFP) than X' This aligns with the idea that, holding capital per person constant, a country with higher productivity will produce more output per worker, potentially making Y richer than X despite differences in capital; higher TFP can offset or amplify capital differences and determine relative per-capita income.
Option 4: 'the only way for country X to be richer than country Y is if X is less productive (has a lower TFP) than Y' This is inconsistent with standard growth accounting: being richer would, if anything, require equal or higher productivity, not lower, given capital per person is already higher in X. It suggests a contradiction between higher capital and lower productivity.
Option 5: 'none of the above' This would be selected only if none of the previous statements captured the plausible link between capital per person and relative wealth via productivity, but option 3 presents a coherent and commonly understood mechanism linking higher per-capita output to relative wealth through TFP.
In summary, the statements hinge on the relationship between capital per person, productivity, and relative wealth. The option describing that a country Y could be richer only if Y has higher TFP than X properly reflects how productivity differences drive per-capita income when capital per person differs across countries. The other options either misstate the relationship, rely on overly strict conditions, or contradict core growth accounting intuitions.

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If country X has a higher capital per person than country Y, then ________.

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ECON*3020*W04 ECON Quiz 1- Requires Respondus LockDown Browser

If country X has a higher capital per person than country Y, then ________.

View Explanation

Log in for full answers

Similar Questions

Question1 Which of the following variables are potentially included in TFP? All of these choices are correct. the quality of labor the amount of labor the amount of capital ResetMaximum marks: 1 Flag question undefined

Suppose than an economy has output Y = A, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

Total factor productivity reflects:

All other things being equal, an increase in a country’s total factor productivity will:

Question6 Which of the following variables are potentially included in TFP? the quality of labor the amount of labor the amount of capital All of these choices are correct. ResetMaximum marks: 1 Flag question undefined

Question2Question 2 TFP Which of the following is included in TFP? All of these choices are correct. the quality of labor the amount of labor the amount of capital Reset

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ECON3020W04 ECON Quiz 1- Requires Respondus LockDown Browser