To find:
Major reason for productivity growth
Answer to Problem 4MCQ
Option E is correct.
Explanation of Solution
Option E is correct
Technological progress is the major reason for productivity growth. Due to technological progress, human capital per worker increases, thereby leading to increase in productivity growth.
Option A is incorrect
Financial investment is not the major reason for productivity growth, although it is a reason for productivity growth. Increase in financial investment increases the productivity growth.
Option B is incorrect
Increase in aggregate demand does not lead to productivity growth. It demands for production but does not contribute to the productivity of goods and services.
Option C is incorrect
A decrease in the amount of capital per worker does not increase the productivity growth, although it may decrease the productivity.
Option D is incorrect
An increase in the price of capital shows increase in the cost of borrowing. More the price of capital, less is the demand for capital, thereby fall in the productivity.
Chapter 7R Solutions
Krugman's Economics For The Ap® Course
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