Suppose Over Time That a Firm's Production Process Undergoes Capital-Saving

question 41

Multiple Choice

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies:

• A)the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will increase.
• B)the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will decrease.
• C)the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will increase.
• D)the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will decrease.

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Definitions:

Real Exchange Rate

An adjusted exchange rate between two currencies that reflects the purchasing power of the two currencies; it factors in the relative prices of a standard set of goods and services in each country.

U.S. Dollar

The official currency of the United States, widely used as a benchmark in international financial transactions.

Domestic Investment

Refers to the total capital investment in an economy by its residents and businesses, excluding investments in foreign assets.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners in an economy.