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Federal Reserve Bank of Boston Economic Quiz

Productivity and Costs 1. Labor productivity describes the relationship between: Goods produced and labor costs Output and labor costs Capital investment and labor hours Capital investment and output 2. During the first quarter of 2002, productivity rose by 8.6% in the nonfarm business sector, its highest gain in nearly two decades. How might this increase in productivity effect inflation in the short-run? Increases in productivity have no effect on inflation Increases in productivity tend to increase the risk of inflation Increases in producitivy tend to decrease the risk of inflation The effect is unpredictable 3. What tends to happen to unit labor costs when productivity increases? Unit labor costs tend to go up Unit labor costs tend to go down Unit labor costs tend to remain constant The effect is unpredictable 4. What negative effect does an increase in the long-term trend of productivity have on the economy? Higher inflation Decrease in business investment Decrease in wages Mostly positive effects Created with QuizScript

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Economic quiz written by: Delia Sawhney - May 13, 2002 Views expressed in the economic quiz are those of the individual author.