Explain the long-run relationship between real hourly earning and productivity
What will be an ideal response?
Output per work hour or labor productivity has a close relationship with real hourly earnings over the long run. The reason is that real hourly earning is simply a measure of real income. Income and output are two ways of viewing the same relationship. Real income can only increase at the same rate as real output per worker. When workers are more productive they create more revenue for the firm that can be distributed to them in the form of real income. So as real output increases, so does real income which creates the positive association between the two measures.
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Refer to Figure 24-2. Ceteris paribus, an increase in the capital stock would be represented by a movement from
A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A.
Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations?
A) There are fewer government regulations in the United States regarding the way firms can hire and fire workers. B) Job mobility in the United States is more restricted than it is in many foreign countries. C) European countries have more flexible policies regarding the number of hours employees are permitted to work. D) The financial systems of foreign countries are generally more efficient than those in the United States.