Final answer:
A technological advance that allows increased output with a smaller capital investment is considered a capital-saving innovation. This affects the economy by improving labor productivity and encouraging more efficient use of resources.
Step-by-step explanation:
When a technological advance increases output while simultaneously reducing the required investment in capital goods, it is described as capital-saving. In economics, capital refers to assets like machinery, buildings, and infrastructure that are used to produce goods and services. A capital-saving technology allows for more production with the same or less amount of capital. This is in contrast to capital-using technologies which require more capital for increased output.
An example of such an advance is the adoption of more efficient manufacturing equipment that increases labor productivity without the need for additional or more expensive machines. This not only reduces the amount of capital needed to produce a certain amount of goods but also has the potential to free up resources for further innovation or investment in other areas of the economy. Infrastructure, such as roads and bridges, although part of physical capital, is not directly relevant to the concept being described here.