The economy has grown by 4% per year over the past 30 years.During the same period,the labour force has grown by 1% per year and the quantity of physical capital has grown by 5% per year.Each 1% increase in physical capital per worker is estimated to increase productivity by 0.4%.Assume that human capital has not changed during the past 30 years.How much has technological progress contributed to productivity growth?

Question

Quizplus · Accepted Answer

The correct answer is A.The contribution of technological progress to productivity growth can be calculated as the residual after accounting for the contributions of physical capital and labor. In this case, the contribution of physical capital is 0.4% * 5% = 2%, and the contribution of labor is 1%. Therefore, the contribution of technological progress is 4% - 2% - 1% = 1.4%.

The Economy Has Grown by 4% Per Year Over the Past