Question

Which of these is the MOST likely way long-term economic growth takes place? A) increases in interest rates B) increases in overall price level C) increases in labor productivity growth D) increases in labor force participation rate

Answer 1

The correct answer is - C) increases in labor productivity growth.

If an economy has a continuity in the increase of the labor productivity growth, than that is very nice and sure indicator that the economy is on the right way and that it has growth.

The reason for that is that the constant labor productivity growth means that the laborers are becoming more and more efficient as the year go on. The bigger the efficiency of the laborers, the higher the productivity, but also the more quality in the productivity. That would mean that the economy produces more, better, but also more efficiently by using the resources more rationally, so also more cheaply. That kind of situation results in economic growth of the country.