At a high level, economic prosperity and standard of living can be measured by r

Question

At a high level, economic prosperity and standard of living can be measured by real GDP per capita (where capita refers to the entire population, working or not). Real GDP per capita can be expressed as Output per capita (working or not) times share of population employed. (Y / N * N/Pop; where Y = total real output, N = number of employed workers and Pop = Total population). Since the early 1960’s the share of the U.S population that is employed has risen. Further, between 1960 and 2013, average labor productivity has increased about 130%. Based on this which TWO of the following statements are true? (Pick two letters as your answer).

GDP per capita increased less than 130%

GDP per capita increased more than 130%

GDP per capita increased approximately 130%

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been lower

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been higher

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been unaffected.

GDP per capita increased less than 130%

GDP per capita increased more than 130%

GDP per capita increased approximately 130%

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been lower

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been higher

If the share of the population in the workforce had declined during this period (rather than risen), real GDP per capita would have been unaffected.

Explanation / Answer

Answer - Average productivity increased of labor has increased by 130%, from 1960 to 2013. Share of the U.S population that is employed has risen. Increase in average productivity will increase real GDP of an economy. Per Capita real GDP includes employed and unemployed both workers in it thus, GDP per capita increased less than 130%. This statement is true.

If the share of the population in the workforce had declined during this period (rather than risen), RGDP per capita would have been unaffected, since

Real GDP per capita = Y / N * N / Population. If we simplify this equation, we find that,

Real GDP per capita = Y / Population

If workforce declines then real GDP per capital would be unaffected.

Statement A and F are true.

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