Chapter 7, Problem 1TY

To determine

To describe: The percentage by which the labor productivity grows in different countries.

Answer to Problem 1TY

Labor productivity growth rate of each country are-

Country A = 0.2

Country B = 0.4

Country C = 0.5

Country D = 0.2

Yes, country C has the highest productivity growth rate when the initial productivity is lower.

Explanation of Solution

The table showing the labor output per hour for different countries can be given as follows:

Country	Output per hour
	2004	2014
A	40	48
B	35	35
C	3	3
D	0.5	0.6

The formula for calculating the labor productivity growth rate is

  $\begin{array}{l}\text{Growth rate is = }\frac{Y}{Y_{t-1}}-1\\ where,\\ Y_t=\text{Current period output}\\ Y_{t-1}=\text{Previous period output}\end{array}$

In case of Country A, given values are substituted

  $\begin{array}{l}{\text{Growth rate}}_{\text{A}}\text{= }\frac{48}{40}-1\\ \text{ = }1.2-1=0.2\end{array}$

Labor productivity growth of Country B can be calculated as

  $\begin{array}{l}{\text{Growth rate}}_B\text{= }\frac{35}{25}-1\\ \text{ = }1.4-1=0.4\end{array}$

Labor productivity growth of Country C can be calculated as

  $\begin{array}{l}{\text{Growth rate}}_C\text{= }\frac{3}{2}-1\\ \text{ = }1.5-1=0.5\end{array}$

Labor productivity growth of Country D can be calculated as

  $\begin{array}{l}{\text{Growth rate}}_D\text{= }\frac{0.6}{0.5}-1\\ \text{ = }1.2-1=0.2\end{array}$

Productivity can be calculated as the amount of GDP per worker or GDP per hour, the value of what is generated per worker, or per hour worked. The rate of growth in productivity is the primary determinant of long-term economic growth and higher wages in an economy. Country C has achieved a higher rate of productivity growth in the given case when it initially had lower productivity. It showed a growth rate of 50 percent while it had initial productivity per hour as $2 and is the highest among other countries.

Economics Concept Introduction

Introduction:

GDP represents Gross Domestic Product. It can be defined as the market value of all the finished goods that are produced in a given period in a country. GDP may be measured periodically but is typically performed annually. The Nominal GDP, Real GDP, GDP growth rate and GDP per capita are various types of GDP statistics.