What is the effect on real GDP per person if labor productivity increases? What is the effect on the nation's standard of living?
What will be an ideal response?
Real GDP equals (aggregate hours) × (labor productivity). Hence an increase in labor productivity increases real GDP. Real GDP per person equals (real GDP) ÷ (population). Therefore an increase in real GDP with no change in the population increases real GDP per person. The nation's standard of living is measured by real GDP per person. So, an increase in labor productivity boosts real GDP per person and therefore boosts the nation's standard of living.
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In the case of purely flexible exchange rates, a decrease in domestic real income, with constant prices and domestic credit, will lead to
A) an increase in international reserves. B) the depreciation of the domestic currency. C) the appreciation of the domestic currency. D) no change in the value of the domestic currency.
Which of the following can create demand-pull inflation?
a. Higher labor costs b. Recessions and depressions c. Sharply rising oil prices d. Excessive aggregate spending