Holding all other factors constant,a technological improvement that increases the marginal product of capital will

Question

Quizplus · Accepted Answer

An increase in the marginal product of capital will increase the returns to investment, leading firms to increase investment levels to take advantage of the higher returns. This, in turn, will increase national saving as more funds will be set aside for investment. Therefore, choice C is the correct answer. Option A is incorrect because an increase in national saving is a consequence of the increase in investment. Option B is incorrect because a higher marginal product of capital would lead to more investment, hence, more saving. Option D is incorrect because an increase in the marginal product of capital would lead to more investment, hence, the opposite effect would occur. Lastly, option E is incorrect because the question is asking about national saving, not private saving.

Holding All Other Factors Constant,a Technological Improvement That Increases the Marginal