Suppose that over the past ten years productivity grew faster in Oceania than in Landia and the population of both countries was unchanged.What can we conclude?
A) Real GDP per person must be higher in Oceania than in Landia.
B) Real GDP per person grew faster in Oceania than in Landia.
C) The standard of living must be higher in Oceania than in Landia.
D) Oceania must have had a greater capital stock than Landia.

Question

Quizplus · Accepted Answer

Productivity growth is directly related to real GDP per person. Therefore, if productivity grew faster in Oceania than in Landia over the past ten years and the population of both countries was unchanged, then it can be concluded that real GDP per person grew faster in Oceania than in Landia. However, it cannot be concluded that real GDP per person is necessarily higher in Oceania than in Landia, as other factors such as initial levels of productivity and real GDP per person, as well as changes in the distribution of income, can also play a role in determining the relative standards of living between the two countries. The information provided in the question does not allow us to make any conclusion about the level of capital stock in Oceania or Landia.

Suppose That Over the Past Ten Years Productivity Grew Faster