Which of the following is a reason why the coefficient corresponding to the growth rate of capital per hour of work is one-third in Solow's growth accounting formula?
A)Capital income plus depreciation is approximately one-third of aggregate income.
B)Capital income plus depreciation is approximately three times the amount of aggregate income.
C)The amount of capital in use is approximately one-third of GDP.
D)The amount of capital in use is approximately three times the level of GDP.
E)Capital is one of the three factors of production.

Question

Quizplus · Accepted Answer

The coefficient corresponding to the growth rate of capital per hour of work in Solow's growth accounting formula is one-third because capital income plus depreciation is approximately one-third of aggregate income. This means that capital is responsible for approximately one-third of the growth in GDP.

Which of the Following Is a Reason Why the Coefficient