Ceteris paribus , as the productivity of workers increases, so does the amount of real GDP per person. B. Determinants of productivity 1. Stock of physical capital 2. Stock of human capital 3. Stock of natural resources 4.
Human capital depends on the extent to which that understanding has been conveyed to workers.
Economic growth and public policy A. Investment leads to an increase in capital stock, ceteris paribus . Since the capital stock is a determinant of productivity, increasing investment leads to increased productivity. Investment is limited to the amount of savings in the economy. Note that if everything was spent on consumption goods, there would be no resources available to produce capital good. B. Diminishing returns and the catch-up effect 1.