Labor productivity is deﬁned as
A) total output/worker-hours.
B) nominal GDP minus real GDP.
C) the ratio of real capital to worker-hours.
D) the annual increase in nominal GDP per worker.

Question

Quizplus · Accepted Answer

Labor productivity measures the output per unit of labor input. Therefore, the best choice is A, which represents the total output (numerator) divided by the worker-hours (denominator). Nominal GDP minus real GDP (B) is the GDP deflator, which is a measure of inflation, and is not relevant for measuring labor productivity. Real capital to worker-hours (C) is not an accurate measure of labor productivity, as it only takes into account one factor of production - capital. The annual increase in nominal GDP per worker (D) is not an accurate measure of labor productivity, as it only measures the increase in output and does not take into account the amount of labor input required to produce that output.

Labor Productivity Is Deﬁned as