If the capital-labour ratio is below the steady-state value,investment is ________ than break-even investment,and the capital-labour ratio ________.

Question

Quizplus · Accepted Answer

If the capital-labour ratio is below the steady-state value (which is where investment = break-even investment), it means that the economy is below its optimal level of capital. This implies that investment needs to be greater than break-even investment in order to bring the economy back to its steady state. In the process of investing more, the capital-labour ratio will increase until it reaches the steady-state value. Therefore, option A is correct.

If the Capital-Labour Ratio Is Below the Steady-State Value,investment Is