What is the relationship between a country’s capital‐labour ratio and its per capita GDP? Could you please give me some examples to explain that?
The per capita GDP refers to a measure of a nation's economic output that accounts for its number of people. It is computed as nation's gross domestic product for a particular period divided by its total population. A higher capital-labour ratio is obtained with improvements in productivity from investment in capital and automating the process of production. The higher "productivity" will lead to higher income because high capital-labour ratio is likely to have higher real wages thus generating a rise in per capita GDP.
For example: The higher capital labour ratio increases per capita GDP because with enhancement in labor productivity there is more production of goods and services for the similar amount of relative work
Year-1 |
Year-2 |
Year-3 |
Year-4 |
|
Assets |
25,000 |
25,000 |
35,000 |
40,000 |
Labor |
30,000 |
25,000 |
20,000 |
16,000 |
Capital-Labor Ratio |
83% |
100% |
175% |
250% |
What is the relationship between a country’s capital‐labour ratio and its per capita GDP? Could you...
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