An increase in total factor productivity causes
A) real wages to rise.
B) labour supply to fall.
C) the output supply curve to shift left.
D) real interest rates to rise.
E) the production function to shift up.

Question

Quizplus · Accepted Answer

An increase in total factor productivity means that, given the same amount of inputs, more output can be produced. This implies that the production function has shifted up, as more output can be produced at any given level of inputs. This leads to higher levels of output and economic growth.

An Increase in Total Factor Productivity Causes