Question

Suppose that an economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent.....

Answer 1

Suppose that an economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent. If labor and capital are the only inputs used in production and capital contributes 25 percent to GDP, then the labor force has risen by _____.
Question 10 options:

1) 1.5 %

2) 2%

3) 4%

4) 6%

5) 8%

Answer 2

I might be able to help if you tell me the relationships between economy, factor productivity and capital stock

Is economy (E) a function of stock (S) and productivity (P)?

Something like

$$
E=\alpha S + \beta P +\delta SP~?
$$

Where \(\alpha, \beta~\&~\delta\) are constants

Answer 3

My book shows this @ybarrap

Answer 4

Ok, so
$$
\%\Delta Y=\%\Delta\text{TFP}+0.7(\%\Delta L)+0.3(\%\Delta K)
$$
Givens:
$$
\%\Delta Y=6\\
\%\Delta\text{TFP}=4\\
\%\Delta K=2
$$
We need to find \(\%\Delta L\), percent change in the labor force.

Using the first equation:
$$
\%\Delta Y=\%\Delta\text{TFP}+0.7(\%\Delta L)+0.3(\%\Delta K)\\
6=4+0.7(\%\Delta L)+0.3\times 2\\
\implies \%\Delta L=\cfrac{6-4-0.3\times 2}{0.7}\\
$$

Does this make sense?

Answer 5

Um yes? But I completed this question 3 hours ago. I took a guess and got it right.