An increase in n (the labor force growth rate) _________ the steady-state capital-output ratio and________ the output per worker in the long-run.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases

Question

Quizplus · Accepted Answer

An increase in the labor force growth rate (n) decreases the steady-state capital-output ratio because more labor means the same amount of capital is spread more thinly, leading to lower capital per worker. It also decreases output per worker in the long run because with more workers and relatively less capital per worker, the productivity and thus the output per worker are lower.

An Increase in N (The Labor Force Growth Rate) _________