If the labor force growth rate increases and the diminishing-returns-to-investment parameter increases, output per worker will _________
A) increase if the effect of the labor force growth rate increase is less than the effect of the growth multiplier increase.
B) decrease.
C) increase.
D) increase if the effect of the labor force growth rate increase is greater than the effect of the growth multiplier increase.

Question

Quizplus · Accepted Answer

If the labor force growth rate increases, it can lead to a decrease in output per worker due to more workers sharing the same amount of capital. However, if the diminishing-returns-to-investment parameter increases, it implies that additional investment is more effective, potentially increasing output per worker. Therefore, output per worker will increase if the positive effect of the increased investment efficiency outweighs the negative effect of the increased labor force.

If the Labor Force Growth Rate Increases and the Diminishing-Returns-To-Investment