Question

Year	Quantity of Labor	Productivity of Labor
1	2,000	$200
2	2,000	210
3	2,000	210

The table shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. Between Year 2 and Year 3, real GDP increased by

• 5 percent.

• 2 percent.

• 10 percent.

• 15 percent.

Answer 1

Solution: None of the answers is correct

Explanation:

Year	Quantity	Productivity	Real GDP
1	2,000	200	400000
2	2,000	210	420000
3	2,000	210	420000

Formulas used: Real GDP = Productivity of Labor x Quantity of labor

There is no change in real GDP in year 2 and 3 thus none of the answer is correct.

If we assume that quantity produced in Year 3 is 2200 there will be 10% increases computed as below:

Year	Quantity	Productivity	Real GDP
1	2,000	200	400000
2	2,000	210	420000
3	2,200	210	462000

(462000 - 420000) / 420,000 * 100 = 10%