If the level of technology rises, GDP per hour of labor increases for any level
ID: 1161180 • Letter: I
Question
If the level of technology rises, GDP per hour of labor
increases for any level of capital per hour of labor.
increases because the level of capital per hour of labor increases.
decreases for a given level of capital per hour of labor.
decreases because the level of capital per hour of labor decreases.
does not change because GDP increases only when capital or labor increases.
increases for any level of capital per hour of labor.
increases because the level of capital per hour of labor increases.
decreases for a given level of capital per hour of labor.
decreases because the level of capital per hour of labor decreases.
does not change because GDP increases only when capital or labor increases.
Explanation / Answer
The Solow model predicts that a country’s standard of living, as measured by income per worker, increases by increase in total factor productivity. That is as level of technology changes the productivity changes. This implies that the income/output per labor hour increases for each given level of capital per hour.
Therefore, the correct answer is :increases for any level of capital per hour.