Suppose that growth in output that can be attributed to growth in labor and capital is 2%. If output grows at a rate of 5%, it must be the case that
A) growth in labor exceeds growth in capital.
B) growth in capital exceeds growth in labor.
C) the economy is experiencing technological progress.
D) the economy is not spending enough on acquiring human capital.

Question

Quizplus · Accepted Answer

The difference between the total output growth (5%) and the growth attributed to labor and capital (2%) suggests that the additional growth is due to factors other than labor and capital, such as technological progress. This is known as growth in total factor productivity.

Suppose That Growth in Output That Can Be Attributed to Growth