Which of the following best describes the impact of technological advancements on capital goods in an economy?

• A. Technology increases the productivity and efficiency of capital goods.
• B. Technology makes capital goods obsolete immediately after introduction.
• C. Technology decreases the usefulness of capital goods over time.
• D. Technology has no significant effect on capital goods.

Answer: (A)

Verified step by step guidance

1. Understand the role of capital goods in an economy: Capital goods are physical assets like machinery, tools, and equipment used to produce consumer goods and services.
2. Recognize what technological advancements mean: These are improvements or innovations that enhance the methods of production or the quality of capital goods.
3. Analyze how technology affects capital goods: Technological advancements typically improve the productivity and efficiency of capital goods, allowing more output to be produced with the same or fewer inputs.
4. Consider the alternative options: Technology does not usually make capital goods obsolete immediately; rather, it gradually improves or replaces older capital goods over time.
5. Conclude that the best description is that technology increases the productivity and efficiency of capital goods, enhancing their usefulness in production.