Labor Productivity, Growth Trends, and Compound Economic Growth

All flashcards

What is labor productivity?

The value of output produced per unit of labor input, such as per worker or per hour worked.

What is human capital?

Workers’ accumulated knowledge, skills, and expertise developed through education, training, and experience.

What are economies of scale?

Cost advantages associated with larger-scale production or a larger production operation.

What does the aggregate production function describe?

The technical relationship between economy-wide inputs and output, such as GDP.

What is compounding in economic growth?

A process in which each period’s growth applies to an amount that includes earlier gains.

Quiz questions

1. How can GDP per capita rise even if the productivity of individual workers does not change?Answer: A larger share of the population becomes employed.
2. An output-per-hour index is 100 in 2012 and 110.5 in 2020. What does the 2020 value indicate?Answer: Measured output per hour was 10.5% above its 2012 level.
3. Why did some economists question whether the late-1990s productivity resurgence established a lasting “new economy”?Answer: Five or ten years of faster growth may not establish a long-term trend.
4. Which formula gives future value when a starting amount grows at constant annual rate $g$ for $n$ years?Answer: $\text{Starting value} \times (1+g)^n$