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Depreciation of euros because of the increase in financial capital influences the European net export. To this end, import becomes expensive and export become cheap (Krugman, and Wells 123). This led to increase in export and decline for imports. The resulting net export is favorable, as exports, shall outweigh imports. The European Union will experience surplus in the current account.
Labor productivity can be improved through education and training to employees. To this end, workers increase their knowhow and effectiveness. This improves the quality of service delivered thereby improving productivity. Technology can improve labor productivity. A well-equipped worker with necessary equipments can deliver services more effectively and efficiently compare to unequipped worker. Technology eases the time and efforts employed by worker in delivering service (Krugman, and Wells 167).
The above diagram assumes increasing opportunity cost between the two goods. The increase in labor productivity increases the production of the two goods. Therefore, the production possibility curve shifts outward as shown
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