Suppose that the table presented below shows an economy’s relationship between real output and the inputs needed to produce that output: LO12.4 Input Quantity Real GDP 150.0 112.5 75.0

$400 300 200

a. What is productivity in this economy?

b. What is the per-unit cost of production if the price of each input unit is $2?

c. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new perunit cost of production? In what direction would the $1 increase in input price push the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?

d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 100 percent. What would be the new per-unit cost of production? What effect would this change in per-unit production cost have on the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?