Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods.

(a) Calculate each country's productivity and real GDP per person.
(b) Which country is better off?

Productivity; Country A = 20 Goods per hour, Country B = 25 Goods per hour.

Real GDP, Country A = 128 Goods per person, Country B = 135 Goods per person

Explanation:

The question is divided into two parts, the first part is to determine th Productivity as well as the Real GDP of the two countries

Solution to Question 1:

The formula for Productivity is Total Output / Total Productive Hours

The formula for Real GDP = The total output / Population

Based on these forumulae, we calculate as follows:

Productivity of Country A: 128,000 final goods / (800 workers x 8 hours a day)

= 20 Goods per hour

Productivity of Country B: 270,000 final goods / (1800workers x 6 hours a day)

= 25Goods per hour

Real GDP per person in Country A = 128,000 final goods/ 1000 people in population

= 128 goods per person

Real GDP per person in Country B = 270,000 final goods/ 2000 people in population

= 135 goods per person

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