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Chapter 20: Q 16. (page 496)

How do gains in labor productivity lead to gains in

GDP per capita?

Short Answer

Expert verified

This happened because of the work done by the workforce.

Step by step solution

01

Step 1. Definition

Worker鈥檚 productivity also known as workforce productivity is defined as an evaluation or appraisal of the efficiency of a worker or a group of workers.

Gross domestic product (GDP) is referred to as the economic value of all finished goods and services manufactured within a nation during a fixed period of time.

02

Step 2. Explanation

Gains in worker productivity mean that the workers are producing more as compared to the past, so the income of the workers will increase for sure as their productivity increases. Now the workers will have more disposable income which they will spend on their consumption and in turn, the demand rises for products. This will lead to the rise in per capita GDP automatically.

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An economy starts off with a GDP per capita of 12,000 euros. How large will the GDP per capita be if it grows at an annual rate of 3% for 10 years? 3% for 30 years? 6% for 30 years?

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