When an economy shifts away from the production of consumer goods and toward the production of capital goods, for the average worker this trade-off means A

Economics Dec 08, 2020

When an economy shifts away from the production of consumer goods and toward the production of capital goods, for the average worker this trade-off means

A. a higher standard of living.

B. longer working hours.

C. a lower savings rate (as a percentage of income).

D. more leisure time.

E. more disposable income.

Expert Solution

The correct answer is E. more disposable income,

This is because the employment of more capital goods leads to an increase in the output level produced. An increase in the output level indicates a higher profit level for the firm in the long-run. Improvement in the employment opportunities and output level, results in higher disposable income as well as the national income.

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