Assume a Cobb-Douglas production function where the share of capital is 0.3 and the share of labor is 0.7.If capital grows by 1.5%, labor grows by 2%, and growth of total factor productivity is 1.2%, by how much does total output grow?
A)4)70%
B)3)50%
C)3)05%
D)2)85%
E)1)20%

Question

Quizplus · Accepted Answer

The growth rate of output in a Cobb-Douglas production function is the weighted sum of the growth rates of capital, labor, and total factor productivity. Thus, 0.3*1.5% + 0.7*2% + 1.2% = 3.05%.

Assume a Cobb-Douglas Production Function Where the Share of Capital