Macroeconomics 10th Edition by William McEachern

Exercise 2

LONG-TERM PRODUCTIVITY GROWTH Suppose that two nations start out in 2013 with identical levels of output per work hour-say, $100 per hour. In the first nation, labor productivity grows by one percent per year in real terms. In the second, it grows by two percent per year in real terms. Use a calculator or a spreadsheet to determine how much output per hour each nation will be producing 20 years later. Then, determine how much each will be producing per hour 100 years later. What do your results tell you about the effects of small differences in productivity growth rates?