Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity.Once the economy has adjusted to its new equilibrium,and assuming that the supplies of capital and labor remain unchanged,which of the following has increased?
A)the real wage
B)the share of capital income in national income
C)the share of labor income in national income
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

An increase in total factor productivity, assuming unchanged supplies of capital and labor, typically leads to an increase in the real wage. This is because the economy becomes more efficient, producing more output per unit of input, which often results in higher wages for workers due to their increased productivity. The shares of capital and labor income in national income may not necessarily change in a predictable manner without more specific information about the distribution of the productivity gains.

Assume That an Economy Is in Equilibrium When Technological Progress