You are a manager in a pharmaceutical company, and you oversee manufacturing operations in North America, Europe, and India. Under your careful management, the European operation becomes significantly more productive than either of the other two. This increase in productivity spreads to other manufacturers in Europe as well, and total factor productivity soars higher in Europe relative to other economies. Based on this information, which of the following statements is true?

Question

You are a manager in a pharmaceutical company, and you oversee manufacturing operations in North America, Europe, and India. Under your careful management, the European operation becomes significantly more productive than either of the other two. This increase in productivity spreads to other manufacturers in Europe as well, and total factor productivity soars higher in Europe relative to other economies. Based on this information, which of the following statements is true?

Quizplus · Accepted Answer

Increased productivity in Europe leads to a higher total factor productivity, which can make European goods more competitive internationally. This competitiveness can increase demand for European goods, which in turn increases demand for the euro to pay for these goods, potentially leading to an appreciation of the euro.

You Are a Manager in a Pharmaceutical Company, and You