Question

GDP has grown in a country at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year. Physical capital per worker in this country has grown by _____%.

Answer 1

Answer:

4%

Explanation:

physical capital per worker has grown by = physical labor growth rate - labor force growth rate = 5% - 1% = 4%

Physical capital refers to the amount of equipment and physical structures used to produce goods and services. The physical capital per worker is a ratio that divides total physical output by the total labor force. An increase in the physical capital per worker should result in an increase in labor productivity. E.g. A delivery service uses a bicycle and is able to deliver 10 packages every 4 hours, but if they start to use a delivery truck, the delivery service will be able deliver 20 packages every 4 hours.