Describe how the labor force, the nation's capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity
Potential GDP growth depends on the growth in the labor force and nations capital stock, in addition to the rate of technical progress. We know that GDP depends on these three factors through a production function. The production function simply expresses how inputs (labor, capital, and technology) are transformed into output.
With respect to labor productivity, we can express growth rate of GDP as:
Growth rate of potential GDP = Growth rate of labor input × Growth rate of labor productivity
Growth in the labor force is equivalent to growth in the labor inputs used to produce GDP. Growth in the capital stock and technology contribute to labor productivity growth. For example, with more machines, an individual worker can be more productive with each hour of work. Likewise, with access to a better machine (improved technology), a worker can produce more in each other of work.
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In a constant-cost industry, an increase in demand will be followed by
A) no increase in supply. B) an increase in supply that will not change price from the higher level that occurs after the demand shift. C) an increase in supply that will bring price down to the level it was before the demand shift. D) an increase in supply that will bring price down below the level it was before the demand shift. E) a decrease in demand to keep price constant.
In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses, Benham found that
a. the average price paid for eyeglasses was nearly 20% higher in the states that did not restrict advertising. b. the average price paid for eyeglasses was nearly 20% lower in the states that did not restrict advertising. c. there was no difference in the average price paid between states that restricted advertising and those that did not. d. the average price paid for eyeglasses was almost 5 times higher in the states that did not restrict advertising.