If economic growth in a given year is 4 percent and the growth rate of resources is 6 percent, the change in total factor productivity is
A) -6 percent.
B) -2 percent.
C) +2 percent.
D) +4 percent.
E) +6 percent.

Question

Quizplus · Accepted Answer

The formula for total factor productivity growth is TFP growth = Economic Growth - Growth in Input. In this case, TFP growth = 4% - 6% = -2%. However, since TFP is a percentage change, we need to express it as a percentage of the initial level, which is 100. Therefore, TFP growth = (-2% / 100%) x 100 = -2%. But since we are looking for the change in TFP growth rate, we need to subtract the initial TFP growth rate from the final TFP growth rate: -2% - (-6%) = 4%. Therefore, the change in TFP growth rate is +4%, which corresponds to choice B.

If Economic Growth in a Given Year Is 4 Percent