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    Question

    A neutral technological change

    __________
    A Shifts the depreciation line leftward Correct Answer Incorrect Answer
    B Increases the effective labor supply Correct Answer Incorrect Answer
    C Has no effect upon the capital-labor ratio Correct Answer Incorrect Answer
    D Shifts the saving and output curve upward. Correct Answer Incorrect Answer

    Solution

    Impact of Neutral Technological Change:

    1. Output and Savings Curve:
      • A neutral technological change increases the overall productivity, which means that for any given amount of capital and labor, the output produced is higher.
      • This higher output increases the level of income, leading to higher savings if the savings rate remains constant.
      • Therefore, the production function shifts upward, and consequently, the savings curve (which is derived from the output) also shifts upward.

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