Countries A and B have the same number of people. They also have the same unemployment rates. However, the labor force participation rate and the productivity in country B are higher than in country A. Choose the correct statement.

Question

BlackTom AI · Accepted Answer

We start by restating the scenario: Countries A and B have the same population and the same unemployment rate, but Country B has a higher labor force participation rate and higher productivity. Our task is to evaluate each answer choice and explain why it is correct or incorrect based on these facts.

Option 1: 'Country A has the higher level of real GDP and country B has the higher real GDP per person.' This claims A has the larger total output (real GDP). Given that B has higher productivity, all else equal, B would generate more output per worker. Since population is the same and unemployment rates are the same, higher productivity in B translates into higher total real GDP for B, not A. Therefore, this statement is incorrect.

Option 2: 'Country B has the higher level of real GDP and country A has the higher real GDP per person.' Here, the claim is that B has higher total GDP but A has higher GDP per capita. Because GDP per person (per capita) is GDP divided by population, and population is the same for both, a higher GDP in B implies a higher GDP per person in B as well. Since B’s productivity is higher, both real GDP and real GDP per person should be higher in B. This makes Option 2 incorrect.

Option 3: 'Country B has the higher level of real GDP and real GDP per person.' This aligns with the given facts: higher productivity in B increases output per worker, and with the same population and unemployment rate, the total real GDP in B rises. Consequently, real GDP is higher in B, and because the population is the same, real GDP per person (GDP per capita) is also higher in B. This option is consistent with the scenario and is correct.

Option 4: 'Country A has the higher level of real GDP and real GDP per person.' This asserts A surpasses B in both total GDP and GDP per person, which contradicts the information that B has higher productivity and higher labor force participation, both of which push B’s output above A’s. Therefore, this option is incorrect.

In summary, options 1, 2, and 4 misstate the implications of higher productivity (and participation) for total GDP or per-capita GDP, while option 3 correctly reflects that Country B has higher real GDP and higher real GDP per person given the stated conditions.

Countries A and B have the same number of people. They also have the same unemployment rates. However, the labor force participation rate and the productivity in country B are higher than in country A. Choose the correct statement.

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