Question

Consider an imaginary 10-year period over which output per person falls, but GDP increases. How can this happen? This is possible if O A. the rate of technical progress is small. B. the rate of unemployment is constant OC. the number of people in the corresponding population is stable D. the rate of increase in the other factors of production is high Do you think this is likely to be good for the economy? Such a long-term decline in output per person is probably O A. desirable because on average people's welfare will increase due to increase in GDP O B. nonsignificant for the economy because it does not prevent a rise in GDP C. highly recommended because after some period of time it enables the economy to implement the latest technologies OD. undesirable because average living standards will be declining

Answer 1

1) Solution: Rate of technical progress is small

Explanation: It will occur when rate of technical progress is small or when there is a small increase in the other factors of production. Labor is increasing faster than GDP thus GDP per person falls

2) Solution: undesirable because average living standards will be declining

Explanation: The long-term decline in output per labor will reduce the average living standards thus is undesirable