If a technological advancement increases productivity, the neoclassical theory of distribution predicts that:
A)the real wage will rise, and the real rental price of capital will fall.
B)both the real wage and the real rental price of capital will fall.
C)both the real wage and the real rental price of capital will rise.
D)the real wage will fall, and the real rental price of capital will rise.

Question

Quizplus · Accepted Answer

According to the neoclassical theory of distribution, a technological advancement that increases productivity will lead to an increase in both the real wage and the real rental price of capital, as both labor and capital become more productive and valuable.

If a Technological Advancement Increases Productivity, the Neoclassical Theory of Distribution