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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’s 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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Most popular questions from this chapter

Use an example to explain why, after periods of rapid growth, a low-income country that has not caught up to a high-income country may feel poor.

List some arguments for and against the likelihood

of convergence.

Over the past 50 years, many countries have experienced an annual growth rate in real GDP per capita greater than that of the United States. Some examples are China, Japan, South Korea, and Taiwan. Does that mean the United States is regressing relative to other countries? Does that mean these countries will eventually overtake the United States in terms of the growth rate of real GDP per capita? Explain.

Why is investing in girls’ education beneficial for growth?

Why does productivity growth in high-income economies not slow down as it runs into diminishing returns from additional investments in physical capital and human capital? Does this show one area where the theory of diminishing returns fails to apply? Why or why not?
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