An increase in the supply of capital, which is a complement to labour, will lead to
A) a decrease in the quantity of labour demanded.
B) an increase in the demand for labour.
C) a decrease in the demand for labour.
D) an increase in the quantity of labour demanded.

Question

Quizplus · Accepted Answer

An increase in the supply of capital will allow firms to invest in more machinery and equipment, which will enhance the productivity of labour. This increase in productivity will result in an increase in the demand for labour, as firms seek to hire more employees to work with the new capital. Therefore, the correct answer is B.

An Increase in the Supply of Capital, Which Is a Complement