Suppose labor's share of output is 70% and capital's share of output is 30%. The country finds that its output grew at a rate of 3.4% during the past year, its labor force grew by 2%, and its capital grew by 3%. In this case, labor contributed percent to the growth of output, capital contributed percent to the growth of output, and the implied rate of growth in technology was percent.

Question

Violet Lucas

Business

17 June, 16:04

Suppose labor's share of output is 70% and capital's share of output is 30%. The country finds that its output grew at a rate of 3.4% during the past year, its labor force grew by 2%, and its capital grew by 3%. In this case, labor contributed percent to the growth of output, capital contributed percent to the growth of output, and the implied rate of growth in technology was percent.

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Jacqueline Gibson · Answer 1

a. Labor contribution 1.4%

b. Capital contribution 0.9%

c. Rate Growth 1.1%

Explanation:

SR (t) = Δy/Δt/Y - (αΔk/Δt/k (t) + (1-α) (ΔL/Δt/L (t))

Here, α = 30%

So, labor's contribution = (1-0.3) * 2 = 1.4%

Capitals contribution = 0.3*3 = 0.9%

Implied rate of growth in technology is given by SR,

SR = (3.4) - (1.4+0.9)

=3.4-2.3

=1.1%