Question

Changes that can increase measured total factor productivity include:

A. increased expenditures on education.
B. regulations requiring reductions in pollution.
C. regulations requiring increases in worker safety.
D. increases in the capital–labor ratio.

Answer 1

The correct answer is letter "A": increased expenditures on education.

Step-by-step explanation:

Total Factor Productivity (TFP) measures the total production of a region by dividing the total amount of output by the weighted average of inputs such as labor and capital. It represents growth in real output as a result of changes in labor and capital. Under such a scenario, changes in the expenditures for education would change the total factor of production since it has a direct impact on labor quality. The higher the expenses in education, the higher the quality of labor.