Q. Suppose in an economy all the other factors of production are held constant and only labour and output increases, then which of the following is most likely to happen?
Red Book
Red Book

[A] Employment decreases

[B] Unemployment decreases

[C] Capital increases

[D] None of the above

Answer: B
Notes:

The factors of production are land, labor, capital, and entrepreneurship. 

If all other factors of production are held constant, economy will need more workers to make more output, not fewer workers. 

When all factors of production other than labour are held constant, unemployment decreases when output increases because output and unemployment are inversely related. 

As is mentioned in the question itself that all factors of production are constant except labour so capital cannot increase. 

Source- Article 

Blog
Academy
Community