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    Hello Forum,
    I would like to know the true meaning behind productivity. Is productivity affected by the quality as well as the quantity of the labour force? How does productivity affect the AD in the short run and LRAS in the long run?

    For your information, the question I am referring to is June 2014 AQA Economics question 08. Many people struggled with this according to the examiners report, and it seems like a fundamental analysis that could be tested in the MCQ and 10/25 markers.

    Thank you!!
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    (Original post by Kaasi)
    Hello Forum,
    I would like to know the true meaning behind productivity. Is productivity affected by the quality as well as the quantity of the labour force? How does productivity affect the AD in the short run and LRAS in the long run?

    For your information, the question I am referring to is June 2014 AQA Economics question 08. Many people struggled with this according to the examiners report, and it seems like a fundamental analysis that could be tested in the MCQ and 10/25 markers.

    Thank you!!
    yes, productivity is affected by the quality and quantity of the workforce because productivity is affected by the number of people working and also the the type of people working- the quicker the workers are the more products made per unit time
    productivity does not affect AD much in the short term but increases LRAS in the long term
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    (Original post by PARTHENON01)
    yes, productivity is affected by the quality and quantity of the workforce because productivity is affected by the number of people working and also the the type of people working- the quicker the workers are the more products made per unit time
    productivity does not affect AD much in the short term but increases LRAS in the long term
    Okay thank you. But how does low productivity affect the economy in the short run and in the long run? Apparently there is a distinctive difference, according to the mark scheme.

    "Good candidates are likely to conclude that,although a period of low productivity growth may have some short–run benefits, in the long run itwill almost certainly damage the performance of the economy."
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    (Original post by Kaasi)
    Hello Forum,
    I would like to know the true meaning behind productivity. Is productivity affected by the quality as well as the quantity of the labour force? How does productivity affect the AD in the short run and LRAS in the long run?

    For your information, the question I am referring to is June 2014 AQA Economics question 08. Many people struggled with this according to the examiners report, and it seems like a fundamental analysis that could be tested in the MCQ and 10/25 markers.

    Thank you!!
    I wouldn't refer to quantity of workers since it could imply production rising rather than productivity. You could refer to 2 or 3 different macro objectives affected from a rise or fall in labour productivity
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    (Original post by keynes24)
    I wouldn't refer to quantity of workers since it could imply production rising rather than productivity. You could refer to 2 or 3 different macro objectives affected from a rise or fall in labour productivity
    Thank you. That seems correct. Lots of students had got confused between productivity and production for that essay. Do you know the like affects on a diagram in the short run and the long run?
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    (Original post by Kaasi)
    Okay thank you. But how does low productivity affect the economy in the short run and in the long run? Apparently there is a distinctive difference, according to the mark scheme.

    "Good candidates are likely to conclude that,although a period of low productivity growth may have some short–run benefits, in the long run itwill almost certainly damage the performance of the economy."
    Low productivity growth can have short run benefits because it means that labour may be retained during a period of recession. In the recent UK recession unemployment did not rise as much as anticipated because firms held on to their labour force despite the falls in output. This led to lower productivity but meant that unemployment did not rise as much as expected thus avoiding a deeper recession. Hence, short term benefits.
    However, in the long run lower productivity relative to other countries means that costs per unit are higher than competitors and so exports are likely to be uncompetitive and imports more competitive.
    Hope this helps
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    (Original post by mapotts53)
    Low productivity growth can have short run benefits because it means that labour may be retained during a period of recession. In the recent UK recession unemployment did not rise as much as anticipated because firms held on to their labour force despite the falls in output. This led to lower productivity but meant that unemployment did not rise as much as expected thus avoiding a deeper recession. Hence, short term benefits.
    However, in the long run lower productivity relative to other countries means that costs per unit are higher than competitors and so exports are likely to be uncompetitive and imports more competitive.
    Hope this helps
    Perfect! Exactly what I was looking for. Lastly, does the UK become less competitive because the LRAS shifts leftwards and resulting in a higher price level? This is just to clarify my analysis...
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    Yes, the lower productivity reduces productive capacity, hence a shift leftwards in LRAS, and a rise in the general price level..
 
 
 
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