Question

Consider the economies of Sporon and Gobbledigook, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 30 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.

Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2012 and 2042.

Answer 1

Productivity can simply be calculated by taking the ratio of Output over Labor Force. That is,

Sporon Calculation Productivity

Year 2012: 1,800 / 30 = 60 60

Year 2014: 2,160 / 30 = 72 72

Gobbledigook Calculation Productivity

Year 2012: 900 / 30 = 30 30

Year 2014: 1,620 / 30 = 54 54