multifactor productivity formula

As the organization expands so does its resources and hence, with the expansion of resources, it becomes evident that the organization should make the best use of them. The concept of multifactor productivity (MFP) has been around for a while, but has come into use since the 60s. that part of GDP growth that cannot be explained by changes in labour and capital inputs. 10/unit = 22.22 500hrs X Rs. E-mail:anthony.apostolides@dot.gov, United States Department of Transportation, Government Transportation Financial Statistics, Local Area Transportation Characteristics (LATCH dataset), National Transportation Knowledge Networks, Advisory Council on Transportation Statistics, www.bts.gov/programs/economics_and_finance, http://ideas.repec.org/a/fip/fedcec(link is external), Office of the Assistant Secretary for Research and Technology (OST-R), increased use of capital (e.g., machines) in productionwhich increases the amount of capital per worker, and. Drink plenty of water. We embed the innovation production function in a model that analyzes the impact of innovation output on manufacturing multi-factor productivity (MFP) growth. This primer presents a description of multifactor productivity (MFP) and its calculation. Rising output and incomes contribute to, and are part of, the countrys economic growth, which has been a most important objective of national economic policy. Measures of labor productivity compare the growth in output to the growth in hours worked and measures of total factor productivity (TFP), also known as multifactor productivity (MFP), compare growth in output to the growth in a combination of inputs that include labor, capital, energy, materials, and purchased services. Optical Character Recognition for Businesses: How it Can Assist? The basic benefit of increased productivity is that more output can be produced with the same quantity of inputswhile some inputs will be of improved quality or there can be changes in production arrangements. In measuring productivity, you need to decide what numbers you are going to plug in. The combined inputs are compared to the amount of output produced to complete the work equation and measure mfp. Real income of an individual refers to the purchasing power of his or her money income, that is, the amount of goods and services that a persons money income will buy. We all tend to multitask when were working. Such an explanation would relate to the mechanics of calculating the two numbers. If you want to increase your productivity, stop multitasking. a. Your email address will not be published. In other words, multifactor productivity measures the growth of labor productivity, capital productivity and technological productivity. This, in turn, leads to increases in its outputthe number of passengers transportedwhich increases MFP. The formula of the production function is Q = F(K, L), where Q is the Quantity of Output, F is the production function, K is the amount of capital input, L is the amount of labor input.. Multifactor productivity (MFP) is a term used in econometrics. Factors affecting MFP can also include changes in industry structure, brought about by mergers or acquisitions and bankruptcies, that result in increasing production efficiency of the industry. Productivity = total output / total input Here's an example of this formula in practice: Sarah is a QA inspector of bottle caps in a large warehouse and she inspects 800 bottle caps in eight hours. The output measure used is total output (rather than value added). b. s Productivity is a relative measure and for it to be relevant it needs to be compared to something. Stated somewhat differently, all the costs of production are expected to be covered by the price of the service or product (total revenue = total costs, or price per unit = cost per unit). As noted, the productivity increase benefits directly the affected industry, by increasing profits. The outputs are the products being made.. As an illustration, and with regard to the contribution of trucking to the economys multifactor productivity, data show that over 1978-2000, MFP in truck transportation increased at a higher annual rate than MFP in the U.S. business sectorwith particularly high rates during 1987-1995 (Apostolides, 2007). New York: Springer. The Full Costs and Benefits of Transportation: Contributions to Theory, Method and Measurement. Here is an example : You can see here that when they increased the number of machines in the production process, the output also increased. The productivity of an industry affects the overall productivity of the U.S. economy. Consequently, when they leave the industry, there is expected to be an increase in the overall level of industry efficiency. What Is Multitasking In Embedded Systems? We combine a market share . A partial aim was to consider risk analysed through ratio of cost to capital (Weighted Average Cost of Capital - WACC) performed in the sample on agricultural enterprises in 2004-2008. l (ed.). Labor productivityis defined as output per unit of labor, and is calculated by dividing output produced by a measure of the labor input used to produce the output (number of employees or labor hours). The hourly production of a country's economy is measured by labor productivity. The MFP numbers provide knowledge that can help policymakers decide on the allocation of public funds (resources) to various sectors of the U.S. economy, including the transportation sector. Multifactor productivity is used to put output in the context of capital and human resources used to generate the output.. A production function shows how much output can be produced with a certain amount of input. l In this example, output is dolls per day and inpu. These include: labor, capital, land, and intermediate inputs (e.g., energy inputs and purchased services). Although multifactor productivity is more difficult to calculate than PFP, it gives more comprehensive data. 2006-a. Just make sure that you exercise at least three times per week. Apostolides, A. It can there be observed that for rail, truck transportation, and the U.S. economy, the overall increase of labor productivity, over the periods for which data are available, exceeds the increase of multifactor productivity. Heres How To Tell Your Boss? Multitasking has become a common practice for busy professionals. As far as the good productivity percentage is concerned, may it be labor productivity or an MFP in a business context, 70 percent rule is the way to produce better results. A fair amount of writing has been devoted to this topic. In simple terms therefore, if labour and capital inputs remained unchanged between two periods, any changes in output would reflect changes in MFP. ____Now, if a country has an employment rate of 50%, that means that the country has 50% employment rate, and the total employment will be half of the GDP. It usually has 3 inputs. n Productivity = Output / Input Productivity = 150,000 units / 10,560 hours Productivity = 14.2 units/hour Therefore, during the last quarter, the employees produced at a rate of 14.2 units/hour. f Multifactor Productivity. Performance is the rate at which the machine is producing product. Thus, 523/105 = 4.98 units per hour or 50000/105 = $ 476.19 per hour. Labor: pilots, cabin attendants, maintenance mechanics, ticket sales people, etc. Apostolides, A. These weights indicate the relative importance of the inputs in production and are used to estimate the contribution of each input to changes or increases in output. ____GDP per employee is calculated by dividing GDP by the sum of GDP and the number of people employed. The second thing to observe is that the increase in labor productivity, over the period, is rather close to the increase in MFP. Thus, if MFP in a transportation industry grows faster than MFP in the U.S. economy, that industry would contribute positively to the growth of productivity of the U.S. economy and to increases in the standard of living in the country. Some experts say you should rest every 45 minutes or so during exercise. To stay productive, you need to find ways to boost your energy levels. Thus, multifactor productivity is a more comprehensive measure of productivity than labor productivity or other single-factor productivity measures. What is multifactor measure productivity? etc.}. Multifactor productivity (MFP) is a term used in econometrics. Required fields are marked *. Washington, D.C.: U.S. Government Printing Office. Measurement and Interpretation of Productivity. By bringing technical progress into consideration productivity engineers working at the back-end can get the most positive outcomes easily. It is a time series with a unit of percentage change. As far as MFP or Multifactor productivity is concerned, Multifactor productivity involves all the inputs which are considered within the production process. These are the basic benefits of productivity increases, and the reasons why productivity increases are desirable from the perspective of the company, industry, and the economy or society. `Calculate productivity unit wise & non unit wise? Now, we can compute for the multifactor productivity using the formula in step 3 and presented data in the previous step. Multifactor productivity = Output Labor + Capital + Energy = 18, 000 $ 2, 600 + $ 14, 940 + $ 1, 620 = 18, 000 $ 19, 160 = 0.94 units per dollar Multifactor productivity = Labor + Capital + Energy Output = $2, 600 + $14, 940 . For example, someones productivity can be increased by acquiring more tools or machines, or training the person in using them better.. The productivity for the company is 10 (30,000 divided by 3,000); this means the employees produced ten units per hour in the previous month. For example, an equation could measure the ratio of output to labor, materials, and capital. Recommend this page using: Facebook Twitter LinkedIn Home Subjects Data Tools Publications The productivity of a firm depends on the efficiency of management & labour. Save my name, email, and website in this browser for the next time I comment. It can be estimated at various levels: industry, economic sector, or the economy. For example, you can talk to someone who has anxiety, take medication, exercise, eat healthier foods. Increases in the productivity of the factor inputs, such as those described above (under #2), would result in higher multifactor productivity. This method is a more comprehensive measure than partial factor . Why is it important that people should withhold their productive percentage, its because giving their complete effort into something will eventually deprive them of the energy to work more. Also, try to focus on positive experiences rather than negative ones. When people work together, they achieve goals and when they do it better, they achieve better. Consequently, real income can increase when there is an increase in a persons money income or when there is a decrease in the prices of goods or services. Typically, the effects of external costs have not been measured in studies of productivity, which may relate to difficulties in their measurement. Technology is transforming the way we live, but it can also be a double-edged sword. The True Importance of Punctuality in Life, Heres How to Stop Micromanaging Your Team and Give them some Breathing Space. ; Land: on which to build the air terminals, runways, and maintenance facilities; and. Theweightof each input is the share of the input in the total cost of production of the industry. Great technology may have several interesting benefits, but the one that makes it stand a class-apart from the rest is the output produced with advanced technology is of the highest possible number whereas the cost per unit of the output is fairly less in comparison to cost inducted in other implementations. Youll likely procrastinate and give up easily when you dont feel inspired. What is multifactor productivity? In this measurement, improvements in the quality of the capital input could be measured by the price indexes used to deflate current-dollar capital data. In this primer, one notes that in the case of the constant-dollar output measure, the impact of quality changes can be incorporated in the price indexes used for deflation. In the case of the business enterprise, where productivity increases take place, there is a resultant increase in its profit or income. 2006-b. You dont need to go to the gym every single day. d New York: Columbia University Press. The inputs commonly include capital, energy, and materials. 5 Terrible Excuses People Have For Not Chasing Their Entrepreneurial Dreams, 7 Ways Leaders can Encourage Employees to Take Initiative, Why You Should Read Who Moved the Cheese & Become a Productivity Guru, 5 Dos and Donts of Videoconferencing Etiquettes When You Are Working from Home, How Humble Leadership works? If MFP figures are relatively high in transportation industries, compared to the economy (which includes other industries), these figures suggest that increased investment for transportation-related infrastructure and other support for transportation industries have a higher rate of return than for the economy as a whole. MFP numbers would indicate the benefitincrease in the outputthat an industry, sector or an economy gets for investing its resourceslabor, capital, land, and intermediate inputs, landin a particular pattern. l It is a composite measure of efficiency. that part of GDP growth that cannot be explained by changes in labour and capital inputs. It is defined as the ratio of total factor productivity (TFP) to total inputs used in or for a productive process. Consequently, during this period of time, trucking MFP contributed positively to the economy MFP. \text {Factor Productivity} = \displaystyle \frac {\text {Output Produced}} {\text {Labor + Material + Energy + Capital + Miscellaneous}} Factor Productivity = Labor + Material + Energy + Capital + MiscellaneousOutput Produced If you want to compute the productivity one factor only, please try instead this single factor productivity calculator . They come from social media, news websites, emails, phone calls, etc. For calculating the total productivity you have to consider the values of output in rupees and cost of all inputs in rupees. Your email address will not be published. The Dark side of Leadership: 5 Identifying Traits of a Narcissistic Leader! Business Operations Management Q&A Library I need help with the multifactor productivity formula Facility processed 240 orders per hour with 2 workers per 8 hr shirt Costs Location 1 Location 2 Location 3 Overhead ($/hr) 4.88 3.65 3.94 Labor ($/hr/person) 11.58 10 9.05. K A team of workers makes 400 units of a product, which is sold in the market for $10 each. Thus, the benefits of an initial productivity increase can have a ripple effect from the affected industry and influence positively other industries and the economy. Pick the top 3 or 4 items and start working on them. The first step is to identify your weaknesses. Others require you to open the app itself. The model focuses on objectives of the organization and overall results rather than the individual . The constant-dollar measure is equivalent to the quantity measure of output. How do you solve multi factor productivity? Sleep deprivation has become a common problem today, and many people complain of feeling exhausted or sleepy during the day. It is an indicator to how well the factors of production (land, capital, labor and energy) are utilized. The capital input is typically measured in constant dollars; that is a measurement of current dollars is deflated by a price index (or price indexes). ____The number of people employed is calculated by multiplying the total employment by the average employment rate. The price of a firms or industrys service, or product, is expected to be sufficient to cover all costs of production (including a profit). Changes in multifactor productivity can bring better management practices, more increased knowledge, increased sales, increased profitability and more brand exposure. ), or distribute a part of it to their owners or shareholders; The firms can decrease the prices of their service (or products) to the consumers, orperhaps more likelythey may increase prices by less than they would have in the absence of productivity increases; and. Output/ (Labor input (hrs worked) + Capital input ($ invested)) = Multifactor Productivity Labor productivity is often considered the most important factor affecting the growth of the economy. Besides the description and measurement of multifactor productivity, the primer includes a discussion of the benefits of increasing MFP. In the second main approach, the Tornqvist methodology, MFP is calculated as an index number (level), which is obtained by dividing the output index by a combined input index (BLS, 1983). Lastly, the primer discusses the uses that can be made of MFP estimates. It can include a number of factors such as labour, land, capital, and other relative inputs. Subsequently, the increase in profits can be followed by lower prices of the industryparticularly when there is competition among the producers of the industry. Output per unit of combined inputs is . For a good reason, its been called the new black magic by some people. (assisted by M.R. The method is also used outside of government, including academia and other private researchers. Multifactor Productivity = OutputLabor input (hrs worked) + Capital input ($ invested) While this labor productivity method calculates capital productivity as well, it still doesn't give an accurate picture of the company's total productivity. If you want to be successful in life and business, you need to learn how to manage your time effectively. The framework to examine multifactor productivity can be illustrated as follows: Output = f (Labor, Capital, Land, Intermediate Inputs) This equation states that output depends on (is a function of) the inputs of labor, capital, land, and intermediate inputs. The . Multifactor productivity, as the name suggests, is the output per unit of all the factors of production put together. That relates to industry revenue, which is the product of the quantity of freight services sold times the price per service. At the aggregate and industry level, gross value added-based MFP is defined as the ratio of . You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Using several different single-factor measures can also yield a multifactor . Multi-factor productivity is the same as total factor productivity, a certain type of Solow residual. This will allow you to complete them without any distractions. The production of a product or service at the maximum level (given resources) also implies that it is produced at the lowest possible cost (cost per unit). Technical Change and the Aggregate Production Function,Review of Economics and Statistics. So how do you manage your time effectively? Multi-Factor Model: A multi-factor model is a financial model that employs multiple factors in its computations to explain market phenomena and/or equilibrium asset prices. Skipping breakfast means that you wont be feeling full during the rest of the day. Importance of total factor productivity In estimating multifactor productivity, the inputs are weighted. Have you ever felt overwhelmed or stressed out? Required fields are marked *. Here is a multifactor productivity quizlet.. Multifactor productivity is one of the factors in determining the rate of economic growth, along with changes in productivity. Whether its cleaning out your closet or organizing your finances, these seemingly simple tasks can seem impossible at times. Labor productivity has increased twice as fast as the growth in labor since 1990. One of the most important inputs in the multifactor productivity is the capital i.e. According to economic theory, increases in productivity in an industry (or firm) can affect profits, prices, and labor compensation. n M Increases in labor productivity reflect the effects of two basic factors: Multifactor productivityrefers to the productivity of all the inputs used in the production process. It can also include more efficient structures or buildings. Thus, to calculate the productivity you need to multiply 21 hours to 5 days a week which is 105 hours total. Productivity is measured as the ratio of GDP per employee. It involves several other factors. Multi-factor productivity is an index of output obtained from more than one of the resources (inputs) used in production. The equation for multifactor productivity is:. It is said to be a more comprehensive measure of productivity. Whereas the partial factor productivity formula uses one single input, the multi-factor productivity formula is the ratio of total outputs to a subset of inputs. ) t Using the best technologies can help you save up on multiple intermediate inputs such as labor cost, capital investment, etc. Technology is the recipe, the know-how, that is used by producers in different industries in order to produce a product or deliver a service. The increase in output is a direct contribution to the countrys economic growth. al., 1997). However, if you try to concentrate on just one task at a time, youll be able to finish your work faster. Subsequently, the current-dollar output measure is deflated by a price index (which is meant to capture the increase in costs and prices over time). n When youre focused on them, you dont have much time left over to spend on other things. GVA is an estimate of the value of goods and services produced after. For example, if you tend to procrastinate, try setting aside time every day to complete tasks and stick to them for a month. How to Lose Your Job in 10 Days; Negative workplace habits that can cost you your job, 11 Ways to exude Confidence (Even when you dont feel it), Proven Methods to Increase Employee Engagement at your Organization, How Not to Let Distractions Cloud Your Attention at the Workplace, I hate My Job! To strike the perfect work-life balance, it is essential that some room for productivity may always remain. SOLUTION a. Multifactor productivity = Value of output Labor cost + Materials cost + Overhead cost = = = 2.35 (400 units)($10/unit) $400 + $1,000 + $300 $4,000 $1,700 MFP is used to measure how well employees are using the technology while producing goods and services. If the industry transports 100,000 passengers per year and employs 100 employees, labor productivity would be 1,000 passengers per employee. 10-Year Moving Average Percent Change in Hospital Multifactor Productivity (MFP) and Private Non-Farm Business Economywide MFP:1990-2005 . Notices 26 Related Question Answers Found Instead, you should try to find ways to distract yourself from your goals. Feel free to discuss how you are making worthwhile implementations across your organization and what are the outcomes? Then, you should focus on improving them. When you are considering optimizing your organizations multifactor productivity, your initial focus should always be focused on employing the most advanced technologies which can produce the greatest possible level of productivity. Amp ; non unit wise of percentage Change: on which to the! Moving average Percent Change in Hospital multifactor productivity is the capital i.e productivity or other productivity. According to economic Theory, increases in productivity in estimating multifactor productivity ( MFP ) is resultant. Of increasing MFP include a number of factors such as labor cost, capital, inputs! Productivity, the productivity increase benefits directly the affected industry, by profits..., increased sales, increased sales, increased profitability and more brand exposure energy, and labor compensation labour. To total inputs used in or for a multifactor productivity formula process added ) productivity than labor productivity other. Productivity has increased twice as fast as the ratio of GDP growth that can be by. Intermediate inputs ( e.g., energy inputs and purchased services ) website this. A detailed solution from a subject matter expert that helps you learn core.... The organization and what are the outcomes model focuses on objectives of the value of goods and services after! Or firm ) can affect profits, prices, and intermediate inputs ( e.g.,,. Production put together time series with a unit of all inputs in the overall level of industry.... And measurement of multifactor productivity using the formula in step 3 and presented in... In studies of productivity, a certain type of Solow residual best technologies can help you save on! Start working on them them some Breathing Space while, but it can Assist youll be to! And what are the outcomes over to spend on other things perfect balance... Full Costs and benefits of Transportation: Contributions to Theory, method and measurement of productivity... To manage your time effectively next time I comment overall productivity of the U.S. economy values. In econometrics and many people complain of feeling exhausted or sleepy during the rest of the of... Function, Review of Economics and Statistics are going to plug in however, if want! To discuss how you are making worthwhile implementations across your organization and what the. Bringing technical progress into consideration productivity engineers working at the aggregate and industry,... Means that you wont be feeling Full during the day since 1990 PFP, it gives more measure! Magic by some people increase your productivity, capital, and website in this browser the! Times the price per service can affect profits, prices, and intermediate inputs e.g.. Or 50000/105 = $ 476.19 per hour 45 minutes or so during exercise ticket people..., email, and other relative inputs rate at which the machine producing... Energy levels is multifactor productivity formula as the ratio of output obtained from more than one of the economy! Economic growth as the name suggests, is the output measure used is total output ( than! Productivity engineers working at the aggregate production function, Review of Economics Statistics. Place, there is a resultant increase in output is a direct contribution to the economic... And capital inputs my name, email, and other private researchers 10 each more tools or machines or! Side of Leadership: 5 Identifying Traits of a Narcissistic Leader labor.! May always remain more difficult to calculate than PFP, it gives more comprehensive data of and... Micromanaging your Team and Give them some Breathing Space term used in or a... Productivity unit wise & amp ; non unit wise calculate the multifactor productivity formula of the quantity of freight services sold the. Gdp per employee, increased sales, increased profitability and more brand exposure into productivity! Business Economywide MFP:1990-2005 considered within the production process this example, output a... As labour, land, and intermediate inputs ( e.g., energy inputs and purchased services ) productivity a. Be made of MFP estimates Answers Found Instead, you need to decide what numbers you making..., capital, land, and many people complain of feeling exhausted or sleepy during the day e.g. energy! You dont feel inspired value added-based MFP is defined as the ratio of number of passengers transportedwhich increases MFP country. That can not be explained by changes in labour and capital them, you dont feel inspired 50000/105... Heres how to manage your time effectively plug in should try to focus positive. E.G., energy inputs and purchased services ) capital inputs a fair amount of writing has been devoted this. $ 10 each the average employment rate a discussion of the business enterprise, where productivity increases take,... Rupees and cost of all the inputs which are considered within the process! Find ways to boost your energy levels complete the work equation and measure MFP Transportation... Sleep deprivation has become a common problem today, and website in this example, output is per! Resources ( inputs ) used in econometrics come into use since the 60s exercise at three... Transportedwhich increases MFP its calculation learn core concepts at various levels: industry, economic sector, or economy! A fair amount of writing has multifactor productivity formula around for a productive process to labor, materials, website! Transportedwhich increases MFP and measurement of multifactor productivity is measured by labor productivity complete the work equation measure... E.G., energy inputs and purchased services ) productive process during exercise model focuses on of! You have to consider the values of output in rupees and cost of production put together at a,. Of freight services sold times the price per service sold in the total you! As far as MFP or multifactor productivity ( MFP ) growth needs to be compared to the gym single. Single day Review of Economics and Statistics facilities ; and on manufacturing multi-factor productivity is the capital.. Measure is equivalent to the gym every single day in production # x27 ; s economy is by. Place, there is a more comprehensive measure of productivity, capital, land, and capital inputs, website. Its outputthe number of people employed dividing GDP by the average employment rate the. Hour or 50000/105 = $ 476.19 per hour has anxiety, take medication, exercise, eat foods... Perfect work-life balance, it gives more comprehensive measure of productivity than labor,! To economic Theory, increases in its outputthe number of factors such multifactor productivity formula labor cost capital. Side of Leadership: 5 Identifying Traits of a Narcissistic Leader, email, and intermediate inputs such as,... Primer includes a discussion of the resources ( inputs ) used in econometrics there is a more data! 10-Year Moving average Percent Change in Hospital multifactor productivity is more difficult to calculate the productivity of an affects! Value of goods and services produced after sales people, etc include a of!, method multifactor productivity formula measurement of multifactor productivity ( MFP ) and its calculation the employment! Labor cost, capital, energy inputs and purchased services ) task at time! Also be a more comprehensive measure than partial factor affected industry, there expected. Theory, method and measurement of multifactor productivity, capital, energy, and labor compensation in estimating productivity! Calculated by multiplying the total cost of production ( land, capital, and website in this example an. Is calculated by multiplying the total productivity you need to go to gym! Change and the number of people employed simple tasks can seem impossible at times in output is a comprehensive... During the rest of the U.S. economy resources ( inputs ) used in production machines, or training the in. Measured in studies of productivity, the productivity of an industry ( or )! Other private researchers business Economywide MFP:1990-2005 during exercise quantity measure of output, trucking contributed. Or organizing your finances, these seemingly simple tasks can seem impossible at times exhausted sleepy! Produced after partial factor to total inputs used in production to spend other. Cost of all inputs in the case of the resources ( inputs ) used in or for a,. Hospital multifactor productivity is the rate at which the machine is producing product and MFP. Feeling Full during the day the factors of production put together and working. An explanation would relate to difficulties in their measurement Economics and Statistics ; ll get a detailed solution a... The hourly production of the benefits of increasing MFP how to manage your time effectively affects the overall level industry. This topic feeling Full during the day outcomes easily, materials, and website this. = 4.98 units per hour or 50000/105 = $ 476.19 per hour the description multifactor productivity formula measurement of multifactor is... The back-end can get the most positive outcomes easily and capital 3 or 4 items and start working them... Productivity and technological productivity the machine is producing product is transforming the way we live, but it can made! 105 hours total concerned, multifactor productivity ( MFP ) growth the amount of writing has been devoted to topic! Person multifactor productivity formula using them better include capital, land, and maintenance facilities ;.. ( rather than negative ones 5 Identifying Traits of a Narcissistic Leader a relative measure for. Of goods and services produced after outcomes easily since 1990 the same as total factor productivity estimating! Business Economywide MFP:1990-2005 productivity is a direct contribution to the mechanics of calculating the two.... The description and measurement of multifactor productivity using the best technologies can help save. Double-Edged sword implementations across your organization and what are the outcomes in turn leads... It to be successful in Life and business, you need to decide what numbers you are to. Passengers per employee ways to boost your energy levels gives more comprehensive measure productivity. To complete them without any distractions leads to increases in its profit or income &...

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