Why do small changes in productivity growth rates have large long-term effects on economic growth over the long run?
A) because lower productivity growth makes labour discouraged, which compounds the problem
B) because the effects of lower productivity growth on the economy are compounded over the years, which leads to large cumulative effects
C) because when the productivity growth rate falls, output actually falls
D) because lower productivity growth for one resource means lower productivity growth for all resources

Question

Why do small changes in productivity growth rates have large long-term effects on economic growth over the long run?  
A) because lower productivity growth makes labour discouraged, which compounds the problem 
B) because the effects of lower productivity growth on the economy are compounded over the years, which leads to large cumulative effects 
C) because when the productivity growth rate falls, output actually falls 
D) because lower productivity growth for one resource means lower productivity growth for all resources

Quizplus · Accepted Answer

Small changes in productivity growth rates can have large long-term effects on economic growth due to the compounding effect over time. These effects can accumulate and lead to substantial differences in output levels and living standards between countries over the long run. Thus, even small improvements in productivity growth rates can have significant effects on economic growth and welfare in the long term.

Why Do Small Changes in Productivity Growth Rates Have Large