Impact of Productivity on Economic Growth

Easy Economic Growth And Development Productivity

Consider a country that experiences a significant increase in its labor productivity due to advancements in technology. This improvement allows workers to produce more goods and services within the same amount of time.

As a student of economics, you are tasked with analyzing how such a productivity increase can impact the overall economic growth of the country.

Which of the following statements best describes the relationship between productivity and economic growth?

Higher productivity leads to increased output potential of the economy, which can directly enhance economic growth.

Increased productivity has no effect on the economy if the labor force remains constant.

Productivity improvements only benefit certain sectors of the economy, leaving overall economic growth unchanged.

Hint

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