Question

If growth in the labor force is 1 percent, growth in labor productivity is 2 percent, and growth in prices is 2 percent, growth in potential (real) output will be

		a. 3 percent
		b. 5 percent
		c. 1 percent
		d. Cannot tell from the information provided

Answer 1

Growth in Real Output is = Growth In Labour Force + Growth In Labour Productivity

= 1% + 2%

= 3%

So the correct option is "A"

This growth equation says that growth in output is the factor of the growth in the labor force in the market and also the growth in labor productivity. We all know that labor productivity will improve when there will be technological advancement. So this equation considers all the factors.

If you find the solution to be helpful, kindly give a thumbs up