Explore BrainMass

Relation between Productivity Growth and Inflation

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Suppose worker productivity increased at the rate of 1.9% per year. If the labor force grew by 1.5% per year, what rate of increase in RGDP would be sustainable without increasing inflation pressures?

© BrainMass Inc. brainmass.com October 25, 2018, 1:11 am ad1c9bdddf

Solution Preview

We generally say that output depends on the factors of production and define a production function that depends on the input factors. The input factors are land, labor, capital, and ...

Solution Summary

Inflation rises if the economy grows at more than the rate of labor productivity growth. This problem illustrates how fast the economy can grow without giving rise to inflationary pressures in the process.

See Also This Related BrainMass Solution

Inflation, deflation, and unemployment; market vs. command economies

1. What is the formal definition of economics?
Economics is the study of how human beings coordinate their wants and desires, given
the decision-making mechanisms, social customs, and political realities of the society.
One of the key words in the definition of the term "economics" is coordination.
2. What is a consideration of economics? What is not?
3. What role does economics play in your personal decisions?
4. What is the difference between real GDP and nominal GDP? Does GDP accurately reflect our nation's productivity? Why or why not?
5. What are the different types of unemployment and how do they affect the economy?
6. What is the formal definition of inflation? What is the formal definition of deflation?
7. What is the historical relationship between inflation and unemployment?
8. Identify a source for economic forecasts of real GDP, the unemployment rate, the inflation rate, and a key interest rate. What do these forecasts imply about the relative strength of the economy over the next two years? How might your organization be impacted by these changes?
9. What is the relationship between the market and aggregate demand and supply curves?
10. What are the advantages and disadvantages of a market economy in comparison with a
command economy?

View Full Posting Details