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discuss the debate over the rate of increase in productivity in the economy and the impact...

  1. discuss the debate over the rate of increase in productivity in the economy and the impact that productivity changes have on real GDP and the price level. I want ecplanation with real time examples. Please give detailed answer

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Answer #1

Increase in productivity helps producers in producing more units of goods with using same capital, labor which will help producers in producing more goods and raise aggregate supply of goods. It will shift aggregate supply curve to its right from AS to AS1 where real GDP rises from Y to Y1 and price falls from P to P1.

For exmple: Automatic machinery of packaging meal box in a restaurant helps workers in packing more boxes and helps them in biilding brand quality.

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