The long-run buildup of an economy's capital stock ________ the marginal product of labor thus shifting the labor demand curve to the ________,which then causes ________.
A)increases,right,SAS to shift to the right
B)increases,right,movement up the SAS curve
C)increases,left,SAS to shift to the left
D)decreases,right,SAS to shift to the left
E)decreases,left,movement down the SAS curve

Question

Quizplus · Accepted Answer

The buildup of an economy's capital stock increases the productivity of labor, which in turn increases the marginal product of labor. This increase in marginal product shifts the demand curve for labor to the right. As a result, the equilibrium quantity of labor hired will increase, and the equilibrium wage rate will also increase. An increase in demand for labor will lead to an increase in output and a rightward shift in the SAS curve. Therefore, the correct answer is A.

The Long-Run Buildup of an Economy's Capital Stock ________ the Marginal