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Long run economic growth depends almost entirely on one in gredient

Long-run economic growth depends almost entirely on one in gredient : rising productivity. Productivity increases (other things equal)when workers are equipped with more physical capital, more human capital, and / or better technology.

Again, suppose that in an attempt to increase productivity, the government requires firms across the economy to provide their workers with flat-panel monitors, wireless keyboards and mice, and cell phones. Initially, each worker was backed by $4,000. Now, each worker is backed by $6,000 worth of physical capital.

The graph below shows three aggregate production functions (aproductivity curve) for the economy. Point N represents the initial state of the economy.

Suppose that, in addition to the increase in capital, the economy experiences significant technological progress.

Determine the point to which the economy moves. What percent of the increase in productivity is accounted for by rising total factor productivity?

(A) 30%

(B) 70%

(C) 45%

(D) 100%

Apr 23 2018 View more View Less

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