Answer to Question #202882 in Macroeconomics for Mariza

Question

Over the past year, in a given country, labor productivity (measured in hours worked) has increased by 5%; the total number of hours worked has remained the same; the number of workers increased by 5%, while the general population increased by 3%. Given this information, what is the approximate growth in the standard of living of this country?

Answer 1

The productivity increases would be increased by 5% and the number of workers increases by 5%. Thus, the total increase in the output would be the sum of the increase in the productivity and the the increase in the number of workers. Thus, the total increase in the output would be 10%.

The population would be increased by 3%. The standard of living would be changed by the difference between the output and the population which would be the difference between the productivity and the population. The standard of living grows by the following:

Growth in Standard of Living=Growth in Productivity- Growth in Population

Growth in Standard of Living=10%-3%

Growth in Standard of Living=7%