Output per hour after 20 years and 100 years.

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Chapter 8, Problem 4P

To determine

Output per hour after 20 years and 100 years.

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Suppose that two nations start out in 2007 with identical levels of output per work hour-say, $100 per hour. In the first nation, labor productivity grows by 1 percent per year. In the second, it grows by 2 percent per year. Use a calculator or a spreadsheet to determine how much output per hour each nation will be producing 20 years later, assuming that labor productivity growth rates do not change. Then, determine how much each will be producing per hour 100 years later. What do your results tell you about the effects of small differences in productivity growth rates?

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