Productivity is the major driver of economic growth

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Productivity is the major driver of economic growth in the United States, accounting for about half of the increase in real GDP over time. Between 1996 and 2001, productivity showed no trend and averaged about 2.7 percent. In 2002, productivity increased to 4.1 percent and then declined to 1.9 percent by 2012. The average growth rate for productivity in this period was 1.1 percent. This development caused concern about such factors as higher inflation and slower economic growth. If productivity continued to decrease, then the resulting slower rate of economic growth would mean smaller increases in real wages and standards of living in the future.

By how much more would output per labor hour and real GDP have increased in this six-year period if productivity growth had averaged 4 percent per year instead of 3 percent per year?

Reference no: EM131196331

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