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Chapter 21: Problem 10

(Related to Solved Problem 21.1 on page 709 ) An article in the Wall Street Journal noted that "raising productivity in the long run is the most effective way to elevate standards of living." Do you agree? Briefly explain.

Short Answer

Expert verified
Yes, raising productivity in the long run is an effective way to elevate standards of living as it leads to more output with the same input, increases income, and when this wealth is distributed, it can improve living standards. However, it should be noted that the distribution of wealth is crucial in this process.

Step by step solution

01

Understanding Key Terms

Productivity refers to the efficiency with which inputs (labour, capital, etc.) are transformed into outputs (goods and services). In economic terms, higher productivity means that more output is being produced with the same quantity of input, or that fewer resources are used to produce the same output. Standards of living generally refer to the level of wealth, comfort, material goods, and necessities available to certain socioeconomic classes in certain geographic areas.
02

Establishing the Connection

As productivity increases, more goods and services are produced with the same input. This leads to an increase in the economic output. This additional income can be used to raise wages, reinvest into businesses, or to fund public services, all of which can improve the standards of living. Though many factors can influence standard of living, increased productivity allows for more wealth that, when distributed, can elevate the overall standard of living.
03

Agreeing or Disagreeing

Though many factors can influence standard of living, increased productivity allows for more wealth that, when distributed, can elevate the overall standard of living. Therefore, one can agree that raising productivity in the long run is indeed one of the most effective ways to elevate standards of living.

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