Question

Edward Denison attributes about percent of our economic growth to increases in productivity. (LO2) a) 10 b) 30 c) 50 d) 70 e) 90

Short answer

d) 70

Step-by-step solution

Determine the correct option

Edward Denison attributes about 70 percent of our economic growth to increases in productivity. Thus, the correct answer is: d) 70

Key concepts

Edward Denison

Edward Fulton Denison was an American economist known for his extensive work on the measurement and analysis of productivity and economic growth. His research concentrated on decomposing the growth of economic output into the factors that could explain changes in productivity. Denison singled out the role of technological advancement and how this impacts the efficiency of labor and capital within the economy.

His work often involved meticulous statistical analysis to understand the underlying causes of economic growth. Denison's insights have not only provided a detailed look at historical economic performance but also helped lay down a framework for policymakers looking to stimulate economies and improve living standards through better productivity.

Economic Productivity

Economic productivity broadly refers to how efficiently economic inputs, such as labor and capital, are used to produce goods and services. It's a measure that can help explain the health and growth potential of an economy. A rise in productivity implies that an economy can produce more output without increasing the input. This concept is vital because improvements in productivity can lead to higher wages, more competitive businesses, and overall economic growth.

Productivity gains can stem from innovation, technological improvements, efficiency enhancements, and even the education and skill level of the workforce. An increase in productivity is beneficial for both individual businesses, as they can increase profits without raising costs, and for the economy as a whole, as it can lead to a higher standard of living.

Factors of Economic Growth

The factors of economic growth are numerous and interrelated, playing a crucial role in determining how quickly an economy expands. They typically include increases in physical capital, human capital, technology, and innovation. Physical capital refers to the machinery, buildings, and infrastructure that enable production; human capital encompasses the education, experience, and abilities of the workforce.

Other factors involve the efficiency of resource allocation due to economic policies, government regulation, and market conditions. Additionally, social and cultural elements, alongside political stability, can greatly affect the investment environment and consequently economic growth.

Investments in education and healthcare can improve the quality of the labor force, while stable political systems tend to attract foreign investment and encourage domestic investment, all of which contribute substantially to the potential for economic growth.