Question

What is meant by the "pace" of economic productivity growth, and why is it important to economic welfare?

Answer 1

Definition of productivity : Productivity is a measure of the efficiency with which a country combines capital and labour to produce more with the same level of factor inputs. Productivity growth will happen when more output with same input is possible or in less input same output is possible.

Technology improvements, labor skills mainly contribute to productivity growth. Productivity growth shifts production possibility curve to right and in the long run may also shift long run aggregate supply to right making more products at less prices improving standard of living.

As discussed above, pace can be taken as the way in which productivity is increasing, drastic technology change, shift from labor to capital intensive manufacturing will increase the pace.Emmigration, natural disasters decrease the pace of economic productivity.

Higher pace of economic growth often comes up with environmental degradation and conflict between commercialisation vs conservation occurs. Hence pace should bring equality, sustainability.