Author Question: Suppose that labor productivity in one economy is higher than it is in some other economy. Does that ... (Read 101 times)

saraeharris · **on:** Jun 30, 2018

Suppose that labor productivity in one economy is higher than it is in some other economy. Does that mean that the first economy is using its productive resources better than the second economy? Explain.

What will be an ideal response?

Question 2

On December 17, 2010, President Obama extended income tax cuts initially enacted in 2001 and 2003 for two additional years.

According to the permanent-income hypothesis, these tax cuts would represent ________ income and would have ________ on consumption. A) permanent; a significant impact
B) permanent; very little impact
C) transitory; a significant impact
D) transitory; very little impact

tennis14576 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Higher labor productivity does not necessarily mean better use of resources. The economy may have more capital per worker, but the productivity of capital may be higher in the second economy. To compare use of resources across economies or over time, the correct measure is total factor productivity.

Answer to Question 2

D