If growth rate of the efficiency of labor increases, with the labor force growth rate, capital stock depreciation rate, and saving rate held constant,
A) the capital-output ratio will decrease.
B) the capital-output ratio will increase.
C) the output-capital ratio will decrease.
D) the level of investment will decrease.

Question

Quizplus · Accepted Answer

An increase in the efficiency of labor, with other factors held constant, leads to higher output for a given amount of capital. This means the capital-output ratio (capital per unit of output) will decrease because the same amount of capital now produces more output.

If Growth Rate of the Efficiency of Labor Increases, with the Labor