Effect of Capital Deepening on Productivity

Easy Economic Growth And Development Capital Deepening

In the context of economic growth and development, capital deepening refers to the process of increasing the amount of capital per worker, thereby improving productivity and output. This concept plays a crucial role in understanding how economies expand over time.

Consider an economy that is experiencing capital deepening through significant investment in technology and machinery.

Which of the following statements best describes an outcome of capital deepening in this economy?

It leads to a temporary decrease in unemployment due to reduced labor demand.

It increases the productivity of workers, potentially leading to higher wages.

It causes inflationary pressures due to increased consumer spending.

Hint

Submitted5.9K

Correct3.6K

% Correct60%