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It measures how efficient it is to produce goods and/or services in an economy. Technically, that means how many inputs (like workers or machinery) it takes to get a certain amount of output. The fewer inputs that are required for a set amount of output, the higher the productivity. Companies try to boost productivity because if they can produce more output with the same inputs than their costs go down – and their profits go up. From the perspective of the overall economy, high productivity is usually a good sign – it shows that innovation is occurring (i.e. improved technology is typically necessary for productivity to improve). And generally speaking, innovation leads to higher standards of living for the overall population (for example, better healthcare productivity = longer lifespans).

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