Productivity and Costs

EconEye Admin

4 years ago

In the first quarter of 2022, output in the manufacturing sector increased 5.7 percent, while work hours increased 5.1 percent.—bls.gov

Answer the following questions to check your understanding of the story.

What is the approximate change in labor productivity in the manufacturing sector in the first quarter of 2022?

Labor productivity _____________.

a) increased by 0.6 percent

b) decreased by 0.6 percent

c) increased by 1.1 percent

d) decreased by 0.9 percent

Labor productivity equals output divided by work hours. How do we use this equation to find the change in labor productivity? If work hours increase by less than output increases, does labor productivity decrease or increase?

Labor productivity equals output divided by work hours. The change in labor productivity equals the change in output minus the change in work hours. The change in labor productivity in the manufacturing sector is 5.7 percent – 5.1 percent, which is an increase of 0.6 percent.

How would the model of the aggregate production function illustrate the information in the news clip?

a) The aggregate production function does not shift, but a movement occurs up along the curve as labor hours increase.

b) Potential GDP doesn’t change, so the aggregate production function doesn’t shift, and there is no movement along the curve.

c) The aggregate production function shifts upward, and a movement occurs along the curve as labor hours increase.

d) The aggregate production function shifts downward, and a movement occurs rightward along the curve as labor hours increase.

When labor productivity increases, each quantity of labor can produce more real GDP. How does the aggregate production function illustrate this?

The increase in labor productivity shifts the aggregate production function upward, and the increase in labor hours creates a movement rightward along the curve.

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