The production function Y = AKbN1-b written in terms of growth rates is

Question

Quizplus · Accepted Answer

The production function is written in terms of growth rates as y = g(Y), where g(Y) denotes the growth rate of Y. Taking logarithms on both sides, we get lnY = lnA + blnK + (1-b)lnN. Differentiating both sides with respect to time, we get dy/y = db(k/K) + (1-b)(n/N), where dy/y denotes the growth rate of Y. Simplifying this equation, we get dy/y = bk/K + (1-b)n/N. Therefore, the answer is option B.

The Production Function Y = AKbN1-B Written in Terms of Growth