Understanding Capital Deepening in Economic Growth

Very Hard Economic Growth And Development Capital Deepening

Consider a hypothetical economy, EcoLand, where recent investments in infrastructure have led to substantial improvements in both physical and human capital. These investments have facilitated greater productivity and efficiency within various sectors, including manufacturing and services. Economists refer to these developments as 'capital deepening'.

Given the context of EcoLand's growth driven by capital deepening, which of the following statements most accurately reflects the implications of this phenomenon on economic development and growth?

Capital deepening primarily increases the marginal returns of existing capital rather than the overall output per worker.

Capital deepening tends to lead to an increase in the labor force participation rate, as more workers are incentivized to enter the market.

Capital deepening enhances productivity by allowing workers to utilize better tools and technology, ultimately increasing output per labor unit.

Hint

Submitted3.9K

Correct2.5K

% Correct65%