A Productivity Improvement Raises Steady-State Output and Consumption Per Worker

question 66

Multiple Choice

A productivity improvement raises steady-state output and consumption per worker in all the ways given below except

• A)it increases the amount that can be produced at any given capital-labour ratio.
• B)it decreases the depreciation rate of capital.
• C)it causes the steady-state capital-labour ratio to rise.
• D)it causes saving per worker to rise.

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Definitions:

Recognized Gain

The portion of a gain that is subject to tax, as realized from the sale or exchange of a capital asset beyond the original purchase price.

Section 1245

A section of the U.S. Internal Revenue Code that deals with the tax treatment of depreciable property and requires the recapture of depreciation upon sale of the property as ordinary income.

Section 1231

A tax provision related to the treatment of gains and losses on property used in a trade or business or held for the production of income.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.