If Labor and Capital Are Complementary in Production and a Technological

question 38

Multiple Choice

If labor and capital are complementary in production and a technological advance increases the productivity of capital, then, ceteris paribus,

• A) labor productivity is likely to fall.
• B) labor productivity is likely to rise.
• C) wages are likely to fall.
• D) Both A and C are correct.

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Definitions:

National Saving

National saving is the sum of private and public savings in an economy, essentially the portion of national income that is not spent on consumption or government expenditure.

Consumption

The use of goods and services by households. It includes spending on durable goods, nondurable goods, and services.

Loanable Funds

The market where savers supply funds for loans to borrowers, often illustrated by the supply and demand for loans.

Interest Rate

The chunk of a loan taken as interest by the borrower, typically outlined as an annual percentage of the loan's outstanding balance.