Describe the shift in, or movement along, the productivity curve caused by each of the following:
The amounts of physical and human capital per worker are unchanged, but there is significant technological progress.
The amount of physical capital per worker grows, but the level of human capital per worker and technology are unchanged.
The real GDP of Erehwon has grown 5% per year over the past 30 years. The amount of physical capital has grown 4% per year. The size of the labor force hasn’t changed. Estimates by economists say that each 1% increase in the amount of physical capital per worker, other things equal, raises productivity by 0.3%.
How much has growing physical capital per worker contributed to productivity growth? What percentage of total productivity growth is that?
How would your answer to part a change if the labor force had grown by 4% per year?
Multinomics, Inc., is a large company with many offices around the country. It has just adopted a new computer system that will affect virtually every function performed within the company. Why might a period of time pass before employees’ productivity is improved by the new computer system? Why might there be a temporary decrease in employees’ productivity?