QuestionJuly 22, 2025

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect: present consumption to rise. future consumption to fall. a lower rate of growth of real GDP. labor productivity to rise.

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect: present consumption to rise. future consumption to fall. a lower rate of growth of real GDP. labor productivity to rise.
Other things equal, if a full-employment economy reallocated a substantial
quantity of its resources to capital goods, we would expect:
present consumption to rise.
future consumption to fall.
a lower rate of growth of real GDP.
labor productivity to rise.

Solution
4.4(62 votes)

Answer

Labor productivity to rise. Explanation 1. Analyze the Reallocation Impact Allocating more resources to capital goods typically means investing in machinery, technology, and infrastructure, which enhances production capabilities. 2. Determine Effects on Consumption and GDP This reallocation may reduce present consumption as resources are diverted from consumer goods. However, it generally leads to increased future consumption due to enhanced productivity and economic growth. 3. Assess Labor Productivity Increased investment in capital goods usually results in higher labor productivity because workers have better tools and technologies to work with.

Explanation

1. Analyze the Reallocation Impact<br /> Allocating more resources to capital goods typically means investing in machinery, technology, and infrastructure, which enhances production capabilities.<br /><br />2. Determine Effects on Consumption and GDP<br /> This reallocation may reduce present consumption as resources are diverted from consumer goods. However, it generally leads to increased future consumption due to enhanced productivity and economic growth.<br /><br />3. Assess Labor Productivity<br /> Increased investment in capital goods usually results in higher labor productivity because workers have better tools and technologies to work with.
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