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Unformatted text preview: But, as productivity increases, so do the number of products and markets available. Similarly, as products become less expensive, due to more efficient production methods, the quantity demanded for some of those products also increases. Overall, in the long run, increases in productivity are offset by increases in demand, so those jobs are not lost. Costs of lagging productivity We just demonstrated how increases in productivity do not necessarily result in a rise in unemployment. But what is the other side of this coin? That is, what are the effects of lagging productivity? In general, a country that lags in productivity will have both lower wages and lower living standards than a country with higher productivity. This assumption is based on the idea that all economies trade on the open market. If a country that lags in productivity produces a good to sell on the international market, it...
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10