If the U.S. real output is growing and labor income accounts for about two-thirds of this amount, then

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BlackTom AI · Accepted Answer

To approach this question, I will evaluate what it means when real output is growing and labor income accounts for about two-thirds of that amount.
Option a: 'the unemployment rate is falling.' While falling unemployment can accompany growth, it is not a guaranteed consequence of rising real output, and the statement provides no direct link between unemployment and the two-thirds labor share. Therefore this option is not a necessary implication of the given information.
Option b: 'on average, capital is getting poorer over time.' If labor income is about two-thirds of output, that does not imply that capital owners become poorer on average; in fact, both capital income and labor income can increase as output grows. The statement makes no claim about what happens to capital income, so this option isn’t supported by the given information and is likely false.
Option c: 'income inequality is decreasing.' A rising real output with a fixed or similar labor share does not automatically imply that inequality is decreasing. Inequality depends on how gains from growth are distributed between labor and capital and among workers themselves. Without additional data on distribution, this cannot be concluded.
Option d: 'on average, workers are getting richer over time.' Given that labor income constitutes about two-thirds of total output and real output is growing, a substantial portion of growth is going to labor income. This suggests that workers, on average, receive higher earnings over time, i.e., their real incomes rise with growth. This is the most direct and plausible implication of the described scenario.
Option e: 'we are not becoming any better off.' The growth of real output combined with a sizable share going to labor income contradicts the idea that nothing improves; continuing growth typically translates into higher real standards of living for workers if incomes rise with output. Hence this option is inconsistent with the scenario described.
In summary, the most consistent interpretation is that a growing real output with two-thirds labor income implies that workers’ earnings tend to rise on average as the economy expands, making option d the best fit among the choices. The other options rely on connections (like unemployment trends, capital depreciation, or universal inequality changes) that are not warranted by the given information and are thus less plausible.

ECON2102-Macroeconomics 2 - T3/2025

If the U.S. real output is growing and labor income accounts for about two-thirds of this amount, then

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