Question

Say that the average worker in Canada has a productivity level of $30 per hour while the average worker in the United Kingdom has a productivity level of $25 per hour (both measured in U.S. dollars). Over the next five years, say that worker productivity in Canada grows at 1% per year while worker productivity in the UK grows 3% per year. After five years, who will have the higher productivity level, and by how much?

a) Canada, $4
b) UK, $5
c) Canada, $2
d) UK, $3

Answer 1

c) Canada, $2 .After calculating the productivity growth for both Canada and the UK over five years, it turns out Canada will still have the higher productivity level by approximately $2.55.

Step-by-step explanation:

To determine which country will have the higher productivity level after five years, we need to calculate the growth in productivity for Canada and the United Kingdom (UK). The initial productivity levels are $30 per hour for Canada and $25 per hour for the UK.

Productivity growth for Canada at 1% per year over five years can be calculated as:

$30 imes (1 + 0.01)^5 = $30 imes 1.051 = $31.53 (rounded to two decimal places)

Productivity growth for the UK at 3% per year over five years can be calculated as:

$25 imes (1 + 0.03)^5 = $25 imes 1.159 = $28.98 (rounded to two decimal places)

After five years, Canada's productivity level will still be higher than the UK's, and the difference in productivity levels can be calculated as:

$31.53 - $28.98 = $2.55 (rounded to two decimal places)

Therefore, the answer is (c) Canada, by approximately $2.55.