Suppose that the economy grows by 3 percent, the labor force rises by 2 percent, and capital rises by 1 percent. If capital takes 40 percent of real GDP and labor takes 60 percent of real GDP, then the growth in total factor productivity must be

Question

Quizplus · Accepted Answer

The growth in total factor productivity is equal to the growth in output minus the growth in inputs. In this case, the growth in output is 3 percent, the growth in labor is 2 percent, and the growth in capital is 1 percent. Therefore, the growth in total factor productivity is 3% - 2% - 1% = 0.6%.

Suppose That the Economy Grows by 3 Percent, the Labor