Labor productivity is output per unit of labor. An increase in labor productivity is a source of economic growth.
(a) Identify two sources of increase in labor productivity.
(b) Assume that a country's economy is at full employment. Productivity has been rising. Using a correctly labeled graph of aggregate demand and aggregate supply, show the long-run effect of the growth in productivity on each of the following.
(i) Real output
(ii) Price level
(c) Assume that the economy produces only two goods, good X and good Y. Using a correctly labeled production possibility diagram, show the effect of the increase in labor productivity.