Question

Increases in total factor productivity (TFP) can generate sustained increases in per capita output

Answer 1

Answer:

1. TFP does not cause diminishing returns
2. both China and India experienced increased standards of living

Explanation:

Total Factor Productivity (TFP) shows how much the economy is growing in excess of the inputs of labor and capital put into the productivity of the economy. It can therefore not be explained by the amount of inputs put into production because it is the part of productivity that is more than the productivity that should have been seen given the inputs put in.

Increasing it does not cause diminishing returns which means it can lead to a sustained increase in per capita output.

Both China and India have experienced growth in the living standards of their citizens from 1980 to 2017 with both of them seeing millions being pulled from poverty. China for instance, managed to reduce the number of poor people in the country from 400+ million in 1981 to 70 million in 2017.