Assume the following production function: . The capital stock and output are measured in trillions and the

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Assume the following production function:

. The capital stock and output are measured in trillions and the labor stock is measured in millions of people.

Yt = AK0.4 t L0.6 t

a) Using the value of output and the capital and labor stocks, calculate the Solow residual and its growth rate for each period. Note: calculate growth rates for periods 2–6.

b) Plot the Solow’s residual (technology)

growth rate and the output growth rate for periods 2–6. Does this table constitute evidence in favor of real business cycle theory? Why?

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Macroeconomics Policy And Practice

ISBN: 9781137393951

1st Edition

Authors: Frederic S. Mishkin

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Question Posted: Nov 11, 2024 06:00 AM

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Assume the following production function: . The capital stock and output are measured in trillions and the

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Macroeconomics Policy And Practice

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