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26 August, 16:32

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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  1. 26 August, 17:10
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    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%
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