Question

2. Productivity, growth, and the per-worker production function

Suppose you were in charge of establishing economic policy for a small island country whose only industry is weaving. When people aren't weaving, they're enjoying leisure time with their families.

Which of the following policies would lead to greater economic growth? Check all that apply.

Subsidizing research and development into new weaving technologies

Imposing a tax on looms (a form of capital)

Offering free public education to increase the human capital of the country

Creating nationalized industries by confiscating foreign looms

What is the best measure of labor productivity in this economy?

Garments woven per year

Garments woven per hour spent weaving

Garments woven per citizen

Garments woven per loom

The leader of the country decides how many people should weave garments each day, and how many looms the country should have. Suppose she suggests increasing the number of people assigned to weaving without changing the number of looms. The effect of this policy would be (an upward shift of/ a downward shift of/ a leftward movement along/ a rightward movement along) the per-worker production function, resulting in (a decrease/ no change/ an increase) in capital per worker and (a decrease/ no change/ an increase) in output per worker.

Answer 1