Stock of human capital 3. Stock of natural resources 4. Human capital depends on the extent to which that understanding has been conveyed to workers. Economic growth and public policy A. Investment leads to an increase in capital stock, ceteris paribus . Since the capital stock is a determinant of productivity, increasing investment leads to increased productivity.
Investment is limited to the amount of savings in the economy.
Note that if everything was spent on consumption goods, there would be no resources available to produce capital good. B. Diminishing returns and the catch-up effect 1. Increasing a country's savings rate will increase the level of productivity over the long run. Increasing a country's savings rate will increase the growth rate of real GDP in the short run, but not in the long run. C. Investment from abroad 1.