Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?
A) less than 0.01
B) around 0.25
C) roughly 0.33
D) close to 0.4
E) exactly 144

Question

Quizplus · Accepted Answer

To find total factor productivity A, use the formula Y = AK^0.3L^0.7. Plug in the values: 12 = A(27)^0.3(64)^0.7. Solving for A gives approximately 0.25.

Suppose Than an Economy Has Output Y = AK0