CHAPTER 8
PRODUCTIVITY AND GROWTH
SOLUTIONS TO END OF CHAPTER PROBLEMS
1. If the population is continually increasing, an economy must produce more goods and services
simply to maintain its standard of living, as measured by output per capita. If output grows
2. a. An economy that produces more capital goods than consumer goods (point A on Graph A
below) will grow more in the future as reflected by the shifting out of the production
possibilities frontier from CI to CI.
b. If a point (B in Graph B) had been chosen, which produced more consumption goods and
3. Between World War II and 1973, growth in labor productivity was strong, averaging 2.8
percent. Labor productivity growth slowed between 1973 and 1982, in part because of
spikes in energy prices and implementation of costly but necessary environmental and
4. Over long periods, small differences in productivity growth rates have significant impacts on
the economy’s ability to produce and, therefore, on the standard of living. The following table
1% Rate of Growth
2% Rate of Growth
Year
in Output per Worker
in Output per Worker
2012
$100
$100
2013
$101
$102
2014
$102
$104
2015
$103
$106
2016
$104
$108
2017
$105
$110
2018
$106
$113
2019
$107
$115
Chapter 8 Productivity and Growth 3
2020
$108
$117
2021
$109
$120
2026
$115
$132
2027
$116
$135
2028
$117
$137
2029
$118
$140
2030
$120
$143
2031
$121
$146
2032
$122
$149
5. Technological change sometimes costs jobs in the short run when workers fail to adjust.
Over time, however, most displaced workers find other jobs, sometimes in new industries
6. Technological change in the banking industry has reduced the need for bank tellers. ATM
machines, debit cards, and electronic banking perform most of the tasks a bank teller once
performed. At the same time, the new technology of the banking industry has created a need