If growth in the labor force is 1 percent, growth in labor productivity is 2 percent, and growth in prices is 2 percent, growth in potential (real) output will be
A) 3 percent
B) 5 percent
C) 1 percent
D) Cannot tell from the information provided

Question

Quizplus · Accepted Answer

Growth in potential (real) output is determined by the sum of the growth in the labor force and the growth in labor productivity. Here, 1% (labor force growth) + 2% (labor productivity growth) = 3%. Growth in prices (inflation) does not affect the calculation of real output growth.

If Growth in the Labor Force Is 1 Percent, Growth