Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 1 - Part I - Ten Principles of Economics - Questions for Review - Page 17: 8


Productivity is important in the economy because productivity allows for the growth of the economy. Productivity refers to the productive necessity of the firms as they produce the outputs and people who buy the goods but are a productive force in the labor market. The combination of productivity of firms and individuals allows for economic growth and rise in GDP.

Work Step by Step

This question tests knowledge of global understanding and the circular flow model. The model shows the factor and product market along with the firms and individuals who work in conjunction. Their productivity causes economic growth. First , think about the circular flow diagram and apply the concept to a global market to realize economic growth is created as productivity rises.
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