Question

An increase in the amount of physical capital per worker _____, while technological progress _____. makes the aggregate production function steeper; makes the aggregate production function flatter shifts up the aggregate production function; moves the economy along the aggregate production function moves the economy along the aggregate production function; shifts up the aggregate production function makes the aggregate production function steeper; changes the slope of the aggregate production function

Answer 1

An increase in the amount of physical capital per worker MOVES THE ECONOMY ALONG THE AGGREGATE PRODUCTION FUNCTION, while technological progress SHIFTS UP THE AGGREGATE PRODUCTION FUNCTION.

Step-by-step explanation:

As physical capital per worker increases, efficiency and productivity increases. Physical capital per worker represents the stock of equipment, tools and machinery per worker, e.g. a delivery man distributes 10 packages a day using a bicycle, but if he is given a delivery truck, he will be able to deliver 30 packages per day.

Technological progress result in a rightward shift of the aggregate supply curve. Technological progress increases productivity in a major way, e.g. computers and the internet have changed the way we work and live. New machineries are usually more efficient and are capable of producing more products at lower costs and with lower wastes and residual byproducts. Automated factories are able to work 24/7 at very low costs per unit of output.

Answer 2

shifts up the aggregate production function; moves the economy along the aggregate production function

Step-by-step explanation:

An increase in the amount of physical capital per worker shifts up the aggregate production function, while technological progress moves the economy along the aggregate production function.

In the case of an increase in the amount of physical capital per worker, what is implied is that at the same number of labor, output increases; this will shift the aggregate production function outwards.

However in the case of technology, the scenario does not say that technology is remaining at the same level but is progressing for output to increase, hence the movement will not be a shift in the curve but a movement along the curve.