Use the following to answer questions :
Scenario: Productivity
The economy has grown by 4% per year over the past 30 years. During the same period the labor force has grown by 1% per year and the quantity of physical capital has grown by 5% per year. Each 1% increase in physical capital per worker is estimated to increase productivity by 0.4%. Assume that human capital has not changed during the past 30 years.
-(Scenario: Productivity) Look at the scenario Productivity. How much has growing physical capital per worker contributed to productivity growth?

Question

Quizplus · Accepted Answer

The growth in physical capital per worker is 5% - 1% = 4%. Each 1% increase in physical capital per worker increases productivity by 0.4%, so 4% * 0.4 = 1.6%.

Use the Following to Answer Questions