The substitution of steel for wooden ploughs in agricultural production is an example of

1. A

   labour-augmenting technological progress

   Labour-augmenting technical progress raises the effective productivity of labour (education, skills, labour-saving organisation that multiplies labour input). Replacing a wooden plough with a steel plough upgrades the tool, which is capital, not labour. This option is not the key.

2. B

   capital-augmenting technological progress

   Capital-augmenting technical progress improves the quality or productivity of capital goods. A steel plough is a better piece of capital than a wooden one, so more output from the same labour. This option is the official key.

3. C

   capital-reducing technological progress

   The substitution does not reduce the capital stock; it improves it. ‘Capital-reducing’ is not the right label. This option is therefore wrong.

4. D

   None of the above

   None of the above would be right only if neither labour- nor capital-augmenting fitted. Capital-augmenting does fit. This option is not the key.

Summary. Official key is (b) capital-augmenting technological progress. The plough is a capital good; steel is a quality upgrade of that capital. Labour-augmenting change would make workers themselves more effective without that tool upgrade as the example. The change is not capital-reducing. Standard growth accounting uses this distinction.