In economic models, an increase in productivity typically leads to what outcome?

An increase in productivity signifies that the economy is capable of producing more goods and services with the same amount of inputs. This enhancement can result from several factors such as technological advancements, improved worker skills, or better organizational practices.

When productivity rises, firms can produce more efficiently, leading to an increase in overall output without a proportional increase in inputs such as labor and capital. As a result, the economy's total output expands, which can contribute to economic growth. A robust increase in output can also create a ripple effect, stimulating further investments, fostering innovation, and potentially increasing employment levels in the long term as businesses expand.

In contrast, decreased investment, increased unemployment, and a reduction in wages typically do not accompany rising productivity. Generally, enhanced productivity creates a more dynamic economic environment, thus supporting the conclusion that increased output is the primary outcome of improved productivity.