Standard of living

Standard of living - can produce more than 10 times more...

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Standard of living Relationship between productivity and unemployment In the previous section we learned that increases in productivity allow a given amount of labor to produce a greater amount of output than was possible before the productivity increase. Popular wisdom dictates that increases in productivity thus reduce the number of jobs available, because less labor is required to produce the same amount of output. Fortunately, this is not the case suggested by the historical economic data. Rather, increased productivity seems to help the economy overall to a much greater extent than it hurts workers, especially in the long run. A historical example will serve to demonstrate this. Since the early 20th century, there has been an over 1000% increase in output per hour in the US. This means that, on average, workers today
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Unformatted text preview: can produce more than 10 times more than what workers, on average, could produce around the turn of the century. With productivity increases this high, it seems that unemployment should be very high, too, as all of the goods and services used in the early 1900's can be produced now by a much smaller workforce. 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....
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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