Question

Consider a small island country whose only industry is weaving. The following table shows information about the small economy in two different years.
Complete the table by calculating physical capital per worker as well as labor productivity.

Year Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity
(Looms) (Workers) (Looms) (Hours) (Garments) (Garments per hour of labor)
2027 300 100 5,000 45,000
2028 480 120 4,200 50,400


Based on your calculations,______ in physical capital per worker from 2027 to 2028 is associated with______ in labor productivity from 2027 to 2028.
Suppose you're in charge of establishing economic policy for this small island country.

Which of the following policies would lead to greater productivity in the weaving industry? Check all that apply.
a. Imposing restrictions on foreign ownership of domestic capital
b. Offering free public education to every worker in the country
c. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts
d. Imposing a tax on looms

Answer 1

Answer:

an increase; an increase.

b. Offering free public education to every worker in the country. c. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts.

Explanation:

Based on the available information, the physical capital per worker and the labor productivity in 2028 are higher than those in 2027 due to an increase in productivity. Furthermore, if there could be free education, savings, and funding for research work, productivity will definitely increase. This will enlighten the workers and boost the economy.