The Solow residual estimated from a production function for Canada shows
A)a linear upward trend.
B)a procyclical trend and leads the cycle.
C)a linear downward trend.
D)no significant changes through time.

Question

Quizplus · Accepted Answer

The Solow residual, which measures total factor productivity, typically shows a procyclical trend, meaning it tends to increase during economic expansions and decrease during recessions. It often leads the business cycle as changes in productivity can drive economic fluctuations.

The Solow Residual Estimated from a Production Function for Canada