When the labor productivity increases due to education, all else equal
The correct answer and explanation is:
Correct Answer:
Real GDP per capita increases
Explanation:
Labor productivity refers to the amount of goods and services that a worker can produce in a given period of time. When labor productivity increases, it means that workers are able to produce more output with the same amount of time and resources. Education plays a vital role in boosting labor productivity. Educated workers are generally more skilled, efficient, and innovative. They are better at using technology, solving problems, and adapting to changes in the workplace.
When workers become more productive due to better education, they can contribute more to the total output of the economy. As a result, the real Gross Domestic Product (GDP) per capita, which is the value of all goods and services produced in a country divided by its population, increases. This rise in real GDP per capita indicates an improvement in the standard of living and economic prosperity.
The increase in productivity also leads to lower production costs and higher profitability for businesses. This can result in higher wages for workers, more investment in new technologies and infrastructure, and greater economic growth over time. Moreover, governments can collect more tax revenue from increased economic activity, which can be reinvested in education, healthcare, and other public services.
This relationship between education and productivity has been observed globally. Countries that invest heavily in education tend to have more productive workers and stronger economies. Conversely, a lack of education can trap a country in a cycle of low productivity and poverty.
In conclusion, when labor productivity rises due to education, and all other factors remain constant, the real GDP per capita increases. This outcome highlights the powerful link between education, productivity, and economic growth.