Chapter 26: Problem 6

Relative to the Chinese economy, the U.S. economy is (LO2) a) more capital intensive b) more labor intensive c) more labor intensive and more capital intensive d) less labor intensive and less capital intensive

Short Answer

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The short answer is: Relative to the Chinese economy, the U.S. economy is more capital intensive.

Step by step solution

Understanding Capital Intensity and Labor Intensity

First, we need to understand the meaning of capital intensity and labor intensity. A capital intensive economy relies more on machinery and equipment for production, while a labor intensive economy relies more on human labor.

Analyzing the Characteristics of Chinese Economy

The Chinese economy has been historically known for its labor intensive industries such as manufacturing, textiles, and electronics. This is because China has a large population supply and lower labor costs, making it more economical for companies to rely on labor for production instead of investing in capital.

Analyzing the Characteristics of U.S. Economy

The U.S. economy has a higher level of capital intensity, as it relies more on advanced machinery, technology, and equipment for production. This is mainly due to the higher labor costs and smaller workforce in the U.S., making it more economical for companies to invest in capital to increase productivity.

Comparing the U.S. Economy with the Chinese Economy

Based on the information above, we can now compare the U.S. economy with the Chinese economy in terms of their capital and labor intensity. Since the U.S. economy relies more on capital (machinery, equipment) for production and has a higher capital intensity, while the Chinese economy relies more on labor and has a higher labor intensity, we can conclude that relative to the Chinese economy, the U.S. economy is: a) more capital intensive

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