What does a productivity curve reflect? What leads to movements along a productivity curve and what leads to shifts in a productivity curve?
What will be an ideal response?
The productivity curve shows the relationship between the amount of capital per hour of labor and real GDP per hour of labor, that is, between capital per hour labor and labor productivity. The curve is upward sloping, but, due to diminishing returns, the slope becomes less steep as capital per hour of labor increases. If the amount of capital per hour of labor changes, there is a movement along the productivity curve. If the amount of human capital increases and/or technology advance occurs, the productivity curve shifts upward.
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Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is
A) P × MP > W. B) P × MP < W. C) MP × W = P. D) P × MP = W.
In the diagram of the budget line BB, a rise in government expenditure shifts BB ________, so that an unchanged GDP the budget deficit ________
A) downward, rises B) downward, falls C) downward, remains unchanged D) upward, rises E) upward, falls