A productivity improvement will cause
A)a rightward movement along the saving-per-worker curve and an increase in the capital-labor ratio.
B)an upward shift in the saving-per-worker curve and an increase in the capital-labor ratio.
C)a downward shift in the saving-per-worker curve and a decrease in the capital-labor ratio.
D)a leftward movement along the saving-per-worker curve and a decrease in the capital-labor ratio.

Question

Quizplus · Accepted Answer

A productivity improvement means that each worker can produce more output with the same amount of capital. This will increase output per worker and increase the return on capital, leading to an increase in saving. The saving-per-worker curve will shift upwards, reflecting the higher level of saving per unit of labor. As investment increases, the capital-labor ratio will also increase, as firms acquire more capital for each worker employed.

A Productivity Improvement Will Cause