Question

1. what steps can the government take to increase productivity? 2. The level of U.S. nominal GDP in 1997 was about 19 times what it was in 1957. Yet it is clear that the typical person living in 1997 did not have 19 times as much stuff as a person living in 1957. How can these two facts be reconciled? Please answer these question for Macroeconomics class.

Answer 1

Answer 1:

The government can take following steps to improve productivity;

1. Increased government investment on infrastructure will help in reducing the cost of doing business and enhance the ease of doing business in the country.

2. Tax and welfare reforms to improve work incentives will increase the amount of work done and will also make people more productive.

3. Improving the quality and affordability of educational facilities in the country will also help in raising productivity.

4. Investing in research and innovation in the country will also improve productivity by reducing average cost of doing business in the country.

5. Improving access to and quality of health care in the country will reduce sickness and absence and improve output per worker.

Answer 2:

The increase in the level of nominal GDP by 19 times does not suggest that real GDP will also increase by 19 times. The price level will also increase with the increase in the level of quantity produced and thus real GDP will increase by a lesser amount as compared to the increase in nominal GDP.Thus, real income will not increase by the same amount as the increase in nominal income. Thus, these facts can be reconciled in this way.