Which of the following clearly demonstrates that total factor productivity is in

Question

Which of the following clearly demonstrates that total factor productivity is increasing? Assume the aggregate production function is upward sloping and exhibits diminishing returns. l per capita, human capital per capita, and real GDP per capita remain constant. Physical capital per worker and human capital per worker decrease, but real GDP per worker remains unchanged. The size of the labor force falls due to emigration which leads to a decrease in real GDP and human capital per worker. Real GDP per worker remains unchanged and physical capital per worker increases O O Real GDP per worker grows at the same rate as human capital per worker.

Explanation / Answer

Ans is B

Technology improvement or productivity increases when we get more output for same inputs or same outputs from less inputs. Thus when physical and human capital per worker decreases then also real GDP per worker remains constant which leads to increase in factor productivity.

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