The capital-labor ratio will tend to increase over time when
A)investment per worker equals saving per worker.
B)investment per worker exceeds saving per worker.
C)investment per worker is less than depreciation per worker.
D)saving per worker equals depreciation per worker.
E) output per worker is less than capital per worker.

Question

Quizplus · Accepted Answer

Investment per worker exceeding saving per worker means that more capital is being invested in each worker, resulting in an increase in the capital-labor ratio over time. Option A and D suggest a balance between investment and saving or saving and depreciation, which will not necessarily result in an increase in capital-labor ratio. Option C suggests that the amount invested per worker is less than the amount depreciated per worker, which will result in a decrease in the capital-labor ratio. Option E suggests that there is not enough capital per worker to produce the desired level of output, but does not necessarily imply an increase in the capital-labor ratio.

The Capital-Labor Ratio Will Tend to Increase Over Time When