What is the effect of an increase in the productivity of capital?

Question

Quizplus · Accepted Answer

An increase in the productivity of capital leads to an increase in the willingness of investors to invest in capital-producing projects, which in turn increases the demand for loanable funds. As a result, the price of borrowing (interest rate) will increase, which will attract more savings from lenders and reallocate resources towards more productive capital projects. This process will eventually lead to a higher level of economic growth and a higher rate of return on investment.

What Is the Effect of an Increase in the Productivity