Improvements in technology are captured in better capital and increases in the capital stock. The reported measure for the enhancements to production resulting from improved and more capital is known as worker productivity . Gains in worker productivity represent higher output per worker hour, day, week, etc. If workers have more and better capital to work with their output increases. Throughout much of the course we will also look at fiscal and monetary policies.
Fiscal policy refers to changes in tax rates and government spending.
Monetary policy is carried out by the Federal Reserve Board and results in changes in interest rates. Fiscal and monetary policies change the demand side of the economy, or where the economy is at in relation to its productive capacity. In contrast, supply side growth refers to the rate of expansion of the PPF . Supply-side economists emphasize the incentive effects to work harder when taxes are reduced. Greater work effort translates into enhanced gains in worker productivity and an increased pace of supply side economic growth.