Which of the following factors of production can be responsible for a drop in the unemployment rate?

• A. An increase in investment in human capital, such as education and training
• B. A decrease in the availability of natural resources
• C. A reduction in technological innovation
• D. A decline in the amount of physical capital

Answer: (A)

Verified step by step guidance

1. Understand that the unemployment rate measures the percentage of the labor force that is actively seeking work but unable to find employment.
2. Recall that factors of production include labor, capital (both physical and human), natural resources, and entrepreneurship, and changes in these can affect employment levels.
3. Analyze how an increase in investment in human capital (education and training) improves workers' skills and productivity, making them more employable and likely reducing unemployment.
4. Consider that a decrease in natural resources, a reduction in technological innovation, or a decline in physical capital typically reduce production capacity or economic growth, which can increase unemployment rather than decrease it.
5. Conclude that among the options, only an increase in investment in human capital directly enhances labor quality and employment prospects, thus potentially causing a drop in the unemployment rate.