An increase in total factor productivity involves

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Quizplus · Accepted Answer

Total factor productivity refers to the efficiency with which inputs are converted into output. Therefore, an improvement in technology for converting factor inputs into aggregate output would increase total factor productivity. A more educated workforce may contribute to an improvement in technology, but it is not a direct factor. A reduced real wage may increase profit margins for firms, but it does not necessarily lead to an increase in total factor productivity. An increase in the capital stock may lead to an increase in output, but it does not necessarily lead to an increase in total factor productivity. More government spending may lead to an increase in output, but it does not necessarily lead to an increase in total factor productivity.

An Increase in Total Factor Productivity Involves