- Jun 2021
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outlier-org.admin.datocms.com outlier-org.admin.datocms.com
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Lesson Text
For this card & the others in this section--if we keep capital deepening defined in the later section, we should revise the wording to avoid referencing capital deepening or heavily edit this section
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Figure 7.7 Capital Deepening and New Technology Imagine that the economy starts at point R, with the level of physical and human capital C1 and the output per capita at G1. If the economy relies only on capital deepening, while remaining at the technology level shown by the Technology 1 line, then it would face diminishing marginal returns as it moved from point R to point U to point W. However, now imagine that capital deepening is combined with improvements in technology. Then, as capital deepens from C1 to C2, technology improves from Technology 1 to Technology 2, and the economy moves from R to S. Similarly, as capital deepens from C2 to C3, technology increases from Technology 2 to Technology 3, and the economy moves from S to T. With improvements in technology, there is no longer any reason that economic growth must necessarily slow down.
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