An increase in the marginal productivity of capital will lead to

Question

Quizplus · Accepted Answer

An increase in the marginal productivity of capital means that each unit of capital is producing more output. As a result, the demand for capital will increase, leading to a rise in the interest rate. This is because the increased demand for capital will push up its price, i.e., the interest rate, to equilibrate the supply and demand for capital. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because none of them logically follows from an increase in the marginal productivity of capital.

An Increase in the Marginal Productivity of Capital Will Lead