Final answer:
The statement that the productivity slowdown in 1973 was mainly due to a decrease in the capital to labour ratio is incorrect. The slowdown was complex and involved external economic shocks and market saturation, leading to higher unemployment and inflation despite rising wages.
Step-by-step explanation:
The statement that the productivity slowdown in 1973 was primarily due to a decrease in the capital to labour ratio is false. The productivity slowdown was actually a result of multiple factors, including but not limited to, the 1973 oil crisis, increased environmental and safety regulations, and a saturation of the market with consumer goods leading to reduced spending. The data illustrates that although there was a marked decrease in the rate of productivity growth from 3.3% annually from 1960 to 1973, to 0.8% annually from 1973 to 1982, the explanation is more complex and can't be solely attributed to a change in the capital to labour ratio.
During this period, the United States experienced stagflation, a combination of high inflation and high unemployment, which challenged the conventional economic wisdom at the time. The unexpected slowing of productivity growth led to wages continuing to increase despite the demand for labor no longer shifting upwards, as equilibrium wages had been rising each year due to previous productivity increases. This created a gap where the quantity of labor supplied exceeded the quantity demanded, leading to increased natural rates of unemployment until wage growth adjusted to match the slower gains in productivity.