What is the effect of higher productivity on economic growth?

Higher productivity positively influences economic growth by enabling higher output levels with the same quantity of resources. When productivity increases, it means that workers or companies can produce more goods or services using the same amount of labor, capital, or materials. This enhances efficiency and allows economies to utilize their resources more effectively.

As a result, businesses can increase their production without needing to expand their input resources, which typically leads to higher overall economic output and growth. This increase in output can stimulate investment, create jobs, and improve living standards, thereby contributing significantly to the economic development of a country. On the contrary, the other options either suggest a decrease in output, inefficiencies, or no impact at all, which do not align with the fundamental economic principle that higher productivity drives growth.