Suppose that the share of GDP paid to capital always equals 25 percent and the remaining 75 percent goes to labor. If, over the course of 20 years, the capital stock had been growing at 2 percent per year, the labor force had been growing at 3 percent per year, and GDP had been climbing at a 3 percent rate, then labor productivity must have been

Question

Quizplus · Accepted Answer

Labor productivity is defined as output (GDP) per worker. Given that GDP grows at 3% per year and the labor force grows at 3% per year, the output per worker (labor productivity) grows at 3% - 3% = 0%. However, the question seems to contain a mistake in its options as none directly reflect this calculation. The closest option based on the provided data is B) growing at 0.25 percent per year, which seems to be an error in the question's formulation. The correct interpretation based on the given growth rates should result in no growth in labor productivity, but given the options and the context, a reevaluation of the question's premise or options might be necessary.

Suppose That the Share of GDP Paid to Capital Always