Some economists argue that the apparent slowdown in productivity growth in the United States in recent years is a measurement problem resulting from the failure of GDP to capture the effects of many recent innovations, such as cloud computing. James Manyika, head of technology at McKinsey & Company, argues that for many of these innovations, “we have all these benefits but we’re not paying for them.”

a. Before the arrival of the Internet, people looking for facts, such as the population of France or the salary of the president of the United States, had to go to the library to look them up. Now people can find that information in a few seconds with a Google search. Are the benefits to you of being able to do a Google search included in GDP? Briefly explain.

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b. Does your answer to part (a) indicate that the slowdown in U.S. productivity growth in recent years is just a measurement problem? What other information would you need to arrive at a definite answer?


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