According to an article in the Wall Street Journal, Federal Reserve Chair Janet Yellen stated that unless obstacles to some women working in the paid labor force are removed, the United States will "incur a substantial loss to the productive capacity of our economy." Ms. Yellen also stated that more women in the labor force would "help overcome long-term challenges such as an aging population and slow productivity growth." a. What measure do economists use for the productive capacity of the economy? b. Why might an aging labor force and slow productivity growth pose long-term challenges to the U.S. economy? How might more women working in the paid labor force help overcome these challenges?

Step by step solution

01

Understand Productive Capacity

Productive capacity (or potential GDP) of the economy is a measure used by economists. It refers to the maximum possible output that an economy can produce with its existing levels of labor, physical capital, technology, and institutions when it is working at full capacity and efficiency. It doesn't fluctuate with economic cycles and represents the long-term growth trends of the economy.

02

Recognize the Challenges of Aging Labor Force and Slow Productivity Growth

An aging labor force and slow productivity growth can pose long-term challenges to the economy because as the population ages, the proportion of the population that is in the labor force decreases. This leads to a decrease in the supply of labor, which can lower potential GDP. Slow productivity growth means that the output per worker is growing slowly, which can also limit the growth of potential GDP.

03

Identify How More Women Working in Paid Labor Force Can Overcome Challenges

More women working in the paid labor force can help overcome these challenges by increasing the size of the labor force. With more people working, the economy can produce more, adding to the potential GDP. It also can balance the decrease in labor force due to the aging population. Furthermore, as women receive education and career opportunities, they can contribute to increased productivity growth.

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