2. Productivity, growth, and the per-worker production function
Suppose you were in charge of establishing economic policy for a small island country whose only industry is weaving. When people aren't weaving, they're enjoying leisure time with their families.
Which of the following policies would lead to greater economic growth? Check all that apply.
Offering free public education to increase the human capital of the country
Lowering the income tax, assuming that it encourages people to work longer hours
Limiting the work week to 35 hours to help workers spend more time with their families
Imposing a tax on looms (a form of capital)
What is the best measure of labor productivity in this economy?
Garments woven per citizen
Garments woven per year
Garments woven per loom
Garments woven per hour spent weaving
The leader of the country decides how many people should weave garments each day, and how many looms the country should have. Suppose she suggests increasing the number of people assigned to weaving without changing the number of looms. The effect of this policy would be (downward shift, leftward movement along, an upward shift of, rightward movement along) the per-worker production function, resulting in (no change, increase, or decrease) in capital per worker and (no change, increase, or decrease) in output per worker.