The link between the productivity of labor and the standard of living is:
A) tenuous and changing.
B) inverse.
C) that over the long run, consumers as a whole can increase their rate of consumption only by increasing labor productivity.
D) that over the long run, consumers' rate of consumption is not related to labor productivity.
E) that the productivity of labor grows much more erratically than the standard of living.

Question

Quizplus · Accepted Answer

The productivity of labor and the standard of living are interdependent. As labor productivity increases, it leads to an increase in output and incomes. Increased productivity causes lower costs of production, and this lowers price levels. Therefore, consumers can buy more goods and services leading to an increase in their standard of living. This process requires time, and it is only over the long run that consumers can increase their rate of consumption by increasing labor productivity.

The Link Between the Productivity of Labor and the Standard