Final answer:
In an aggregate production function Y = AN, labor productivity is represented by the term A. It measures the output per unit of labor, which in the presented function is the factor A. When considering GDP per capita, productivity sheds light on individual contributions to economic growth.
Step-by-step explanation:
In the context of the aggregate production function Y = AN, where Y represents the total output of an economy and N represents labor input, labor productivity is represented by the term A. This is because A stands for the level of technology or factor productivity, which, when multiplied by the number of workers (N), yields the total output (Y). Labor productivity, in economic terms, measures the output per unit of labor and is often considered to assess the efficiency and economic growth of a country. It can be represented as Y/N, which in the context of the given production function, simplifies to A since Y is a product of A and N.
In a scenario where we are looking at GDP per capita as the output, we take into consideration GDP divided by the population. This invokes a shift in focus towards the contributions of human and physical capital on a per-person basis. Understanding this helps economists and policymakers gauge how increases in labor or capital inputs can drive economic growth on an individual level, which is crucial for long-term sustainable development.