Labor productivity is $20 per hour and aggregate hours are 400 billion hours
a. What does real GDP equal?
b. Because of technological advances, labor productivity doubles to $40 per hour. Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?
a. Real GDP equals (labor productivity × aggregate hours) = ($20 per hour × 400 billion hours) = $8 trillion.
b. Real GDP now equals $12 trillion.
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