CAIE A-Level Economics 1.3.2 Human and Physical Capital

Practise distinguishing knowledge and skills embodied in workers from machinery and infrastructure, then tracing how education, training or import policy changes each stock.

Exam points

classify education, training and experience as investment in human capital
classify machinery, tools and infrastructure as physical capital used in further production
predict how a policy changes each capital stock separately rather than assuming both move together

[Maximum number: 1]

A country increases its spending on education and training. It pays for this by reducing unemployment benefit payments and increasing taxes on imports of machinery.

What is the likely effect of these changes?

human capital

physical capital

decreases

increases

decreases

increases

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1.3.2—Human vs physical capital question 1