Other things equal, in which of the following instances would the increase in labour productivity be the greatest?
A)the stock of real capital and inputs of labour increase proportionately
B)the increase in the stock of real capital exceeds the increase in inputs of labour
C)the increase in inputs of labour exceeds the increase in the stock of real capital
D)inputs of labour increase and the stock of real capital remains constant

Question

Quizplus · Accepted Answer

When the increase in the stock of real capital exceeds the increase in inputs of labour, the efficiency and effectiveness of the labour force improve as they have access to better equipment and technology to aid their work. This results in a larger increase in labour productivity than when the stock of real capital and inputs of labour increase proportionately or when the increases are skewed towards inputs of labour only, or when the stock of real capital remains constant.

Other Things Equal, in Which of the Following Instances Would