Consider a small island country whose only industry is weaving. The following table shows information about the small economy in two different years Complete the table by calculating physical capital per worker as well as labor productivity
Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour.
In this problem, measure productivity as the quantity of goods per hour of labor
Year Physical l Labor Force Physical Capital Labor Output Labor
Capital (Workers) per Worker Hours (Garments) Productivity
(Looms) (Looms) (Garments per
hour of labor)
2026 120 60 3300 23100
2027 400 100 3500 49000
Based on your calculationsin physical capital per worker from 2026 to 2027 is associated with in labor productivity from 2026 to 2027
Suppose you're in charge of establishing economic policy for this small island country
Which of the following policies would lead to greater productivity in the weaving industry?
a. Offering free public education to every worker in the country
b. Subsidizing research and development into new weaving technologies
c. Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving
d. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts