Question

If capital investment ceased, what would happen
over time to worker productivity and living
standards?

please answer it by typing

Answer 1

Investment in capital is the backbone of economic growth. The industrialization processes of many economies have shown that investment in capital leads to the growth in the industrial sector, which in turn leads to the increase in output of the country. Capital investments is the investment by multi-national corporations to acquire machines or stock or shares of companies, basically any form of capital. Investment in capital has also been a key driver in the increase in labour productivity as when new and advanced machines are acquired by the firms the labour productivity increases and he can work more efficiently. An example of this is an advanced computer helps the individual do his work better than an older model. We know, Labour productivity being a measure of the real gross domestic product per hour worked is a measure of the output produced by the labour and better technology leads to the labour producing higher outputs and in return he gets higher wages than before which increases his living standards. So if capital investment is ceased there won't be any new technology to improve the working efficiency of the labour and therefore, over time, his productivity may stagnate or even decrease leading to a fall in the living standards that were observed before.