Question
Consider the following statements:
Select the correct answer using the code given below:
- Investment in the economy increases with a decrease in the capital-output ratio
- Economic output increases with a decrease in capital-output ratio
Select the correct answer using the code given below:
Answer: Option B
Answer: (b)
Capital/Output ratio represents (inverse of) productivity of capital. If the capital/output ratio is decreasing, that means capital is becoming more productive. But you cannot say that investment will increase.
But if capital is becoming more productive, then the economic output will increase.
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Answer: (b)
Capital/Output ratio represents (inverse of) productivity of capital. If the capital/output ratio is decreasing, that means capital is becoming more productive. But you cannot say that investment will increase.
But if capital is becoming more productive, then the economic output will increase.
Was this answer helpful ?
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