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CFA Level 1 Question of the Week - Economics

Relatively small increases in capital investment in developing economies with large populations, such as China in the 1990s, are most likely to produce:
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CFA Level 1 Question of the Week - Economics 7 votes

A. large percentage increases in real GDP.
42% 3 votes
B. very large percentage increases in GDP per capita growth rates in the long term.
14% 1 vote
C. very large nominal increases in GDP per capita.
42% 3 votes

Comments

  • Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 141 Associate
    The correct answer is A.

    If an economy has a low output level, then a minor improvement in production has a large percentage impact. To illustrate, if you have a million dollars, presenting you with another dollar has a near-zero impact on your wealth. But, if you have only one dollar and are presented with another dollar, that is a one hundred percent improvement in your wealth. China has a very large population and, in the past, had comparatively little capital.
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