If the growth rate of resources is zero and real output is growing at 4 percent, then
A) total factor productivity has risen by 4 percent.
B) the stock of capital has fallen by 4 percent.
C) economic growth has fallen by 4 percent.
D) the stock of labor has fallen by 4 percent.
E) the percentage share of real GDP received by capital has fallen by 4 percent.

Question

Quizplus · Accepted Answer

If the growth rate of resources is zero and real output is growing at 4 percent, it implies that the growth of real output can be attributed solely to the increase in total factor productivity (TFP). TFP measures the efficiency in the use of inputs such as labor, capital, and technology, and an increase in TFP means the economy is producing more output with the same level of inputs. Thus, option A is the best choice. B and D are incorrect because there is no information provided to suggest a decline in the stock of capital or labor. C is also incorrect since real output growth is positive, not negative. E is also incorrect since there is no information provided to suggest a change in the distribution of income between labor and capital.

If the Growth Rate of Resources Is Zero and Real