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Productivity Growth Rate

1)Take a look at the Productivity Growth Rate over the last 20 years and over the last 5 years , and explain the macro-economic implications such as Potential GDP, GDP growth, inflation, etc. Explain the implications for the thresholds that economic policy makers look at, in particular the speed limit that the federal reserve puts on GDP growth when deciding to raise interest rates (remember the tradeoff between GDP growth, inflation and unemployment).

2)Companies used to make capacity, production, inventory and staffing decisions based on long-range forecasts. Erroneous forecasts were the major cause of the boom/bust business cycle. What is the implication of the New Economy for waste at the top, and under-utilization of resources, at the bottom of the cycle? How do you see the magnitude of future business cycles as compared to the previous cycles we have experienced, and what are the implications for long-term economic growth?

Solution Summary

Productivity Growth Rate is assessed.