4. Productivity and growth in the 20th century

Consider a small island country whose only industry is printing. The following table shows information about the small economy in two different years.

Complete the table by calculating physical capital per worker as well as labor productivity.

Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor.

Year	Physical Capital	Labor Force	Physical Capital per Worker	Labor Hours	Output	Labor Productivity
(Printing presses)	(Workers)	(Printing presses)	(Hours)	(Books)	(Books per hour of labor)
2025	300	100		5,000	45,000
2026	480	120		4,200	50,400

Based on your calculations, _____ (Answer choices: a decrease, or an increase) in physical capital per worker from 2025 to 2026 is associated with ____ (Answer choices: a decrease, or an increase in labor productivity from 2025 to 2026.

Suppose you're in charge of establishing economic policy for this small island country.

Which of the following policies would lead to greater productivity in the printing industry?Check all that apply.

1. Offering free public education to every worker in the country

2. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts

3. Subsidizing research and development into new printing technologies

4. Imposing a tax on printing presses