The effect of an increase in labour productivity, assuming no change in the supply of labour, is
i. an increase in the real wage.
ii. an increase in potential GDP.
iii. a decrease in the demand for labour.

Question

Quizplus · Accepted Answer

An increase in labor productivity means each worker can produce more goods or services in the same amount of time. This generally leads to an increase in real wages, as workers are more valuable to employers. It also increases potential GDP because the economy can produce more with the same amount of labor. However, it does not necessarily decrease the demand for labor; in fact, it might increase demand due to higher production levels.

The Effect of an Increase in Labour Productivity, Assuming No