ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate production function is a hypothetical function that shows how productivity (real GDP per worker) depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology.

Detailed explanation-2: -Increases in the quantities of physical capital, human capital and technology per person lead to a higher standard of living over time.

Detailed explanation-3: -The term human capital refers to the economic value of a worker’s experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality.

Detailed explanation-4: -An increase in physical capital is one source of higher productivity, but it is subject to diminishing returns to physical capital. Human capital and technological progress are also sources of increases in productivity. The aggregate production function is used to estimate the sources of increases in productivity.