The Macroeconomic Implications of Faster Productivity Growth Theory teaches us that the step-up in the growth rate of technological change certainly has important implications for economic activity and inflation. The main reason policymakers and economists are interested in the growth rate of productivity is that it helps us to understand the economy’s potential to supply goods and services.
The effects on the economy’s ability to produce goods and services are clear, but theory predicts that a new higher level of productivity growth would also affect the demand for goods and services. The most immediate effects would be on capital investment, as we have seen. A more rapid pace of technological change raises the real rate of return on new investments--perhaps significantly.