Economic Linkages Between Indicators

Steps:

• Identify pairs: First indicator increases, second follows.
• Recall core economics: Productivity boosts output per worker, raising living standards via higher wages and goods.
• Evaluate each: Check direct causal links without contradictions.
• Select strongest: Productivity to living standards shows clear positive correlation.

Why D is correct:

• Productivity increase means more output per input (e.g., labor), directly raising real GDP per capita and thus living standards per the Solow growth model.

Why the others are wrong:

• A: Budget surplus often signals fiscal restraint, reducing government spending and potentially curbing consumer spending.
• B: Higher consumer spending boosts demand, lowering unemployment via the Phillips curve.
• C: Inflation erodes export competitiveness, typically decreasing trade surplus.

Final answer: D