Chapter 7R, Problem 4MCQ

To determine

To find:

Major reason for productivity growth

Answer to Problem 4MCQ

Option E is correct.

Explanation of Solution

Option E is correct

Technological progress is the major reason for productivity growth. Due to technological progress, human capital per worker increases, thereby leading to increase in productivity growth.

Option A is incorrect

Financial investment is not the major reason for productivity growth, although it is a reason for productivity growth. Increase in financial investment increases the productivity growth.

Option B is incorrect

Increase in aggregate demand does not lead to productivity growth. It demands for production but does not contribute to the productivity of goods and services.

Option C is incorrect

A decrease in the amount of capital per worker does not increase the productivity growth, although it may decrease the productivity.

Option D is incorrect

An increase in the price of capital shows increase in the cost of borrowing. More the price of capital, less is the demand for capital, thereby fall in the productivity.

Economics Concept Introduction

Economic growth is a value of goods and services that are calculated over a period of time according to the current price level.