Question

Suppose labor productivity is $100,000 per worker in 2015. Calculate the value of labor productivity in 2035 (20 years later): Instructions: Enter your responses rounded to the closest $100. a. Productivity grows by 3.7 percent per year. U.S labor productivity in 2035 would be $ per worker. b. Productivity falls to 1.9 percent per year. U.S. labor productivity in 2035 would be $ per worker. c. How much lager would labor productivity per worker be in 2035 with the higher growth rate compared to the lower growth rate. Instructions: Enter your responses rounded to two decimal places. times higher.

Answer 1

a) Labor Productivity in 2015 = $100,000

Growth rate = 3.7%pa = 0.037

Therefore labor productivity per worker in 2035 will be 100000(1 + 0.037)²⁰

= $206811.7111 = $206800( rounded to nearest $100)

b) Labor Productivity in 2015 = $100,000

Growth rate falls by 1.9% per annum

Growth rate = -1.9%pa = -0.019

Therefore labor productivity per worker in 2035 will be 100,000(1-0.019)²⁰

= $68136.55121 = $ 68100 ( rounded to nearest $100)

With higher growth rate, labor productivity in 2035 is $206811.711 and with lower growth rate labor productivity in 2035 will be $68136.55121.

So, we can say that, in 2035, with higher grwoth rate labor productivity will be (206811.711/68136.55121)= 3.04 times the labor productivity with lower growth rate.