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Which of the following situations will result in an increase in the capital-labor ratio?

A. Saving per worker equals depreciation per worker
B. Investment per worker equals saving per worker
C. Investment per worker is less than depreciation per worker
D. Investment per worker exceeds depreciation per worker
E. Output per worker exceeds capital per worker

Answer :

The situation that will result in an increase in the capital-labor ratio is when "investment per worker exceeds depreciation per worker."



To understand this, let's break it down step by step:

1. Capital-labor ratio refers to the amount of capital (machines, equipment, etc.) available per worker in a production process. It indicates the level of capital investment relative to the number of workers.

2. In this question, we are asked to identify which situation will lead to an increase in the capital-labour ratio among the given answer choices.

3. "Investment per worker exceeds depreciation per worker" means that the amount of capital investment made per worker is greater than the amount of capital that wears out or becomes obsolete per worker over a given period.

4. When investment per worker exceeds depreciation per worker, it means that new capital is being added to the production process at a faster rate than old capital is being replaced. This leads to an increase in the capital available per worker, resulting in a higher capital-labour ratio.

So, among the provided options, the situation that will result in an increase in the capital-labour ratio is when "investment per worker exceeds depreciation per worker."

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