In the U.S., between 1990 and 2007, capital stock and the level of technology increased dramatically. During the same period, employment and real wages rose. What do these set of events suggest?

Question

Quizplus · Accepted Answer

The increase in capital stock and technology suggests that the productivity of labor increased, leading to a higher demand for labor. The fact that employment and real wages also increased during this period implies that the increase in demand for labor was greater than the increase in supply of labor, leading to a tightening of the labor market and an increase in wages. Option A correctly captures this relationship.

In the US, Between 1990 and 2007, Capital Stock and the Level