Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.

9) An economy of 82 million people has twenty percent of them engaged in research and development, where their productivity is 0.003. The economy is on a balanced growth path, when suddenly the productiveness of R&D rises to 0.004. For the one period that begins with this productivity increase, the growth rate of output is ________. [Refer to the instruction above.]

A) 8.7%

B) 9.4%

C) 6.6%

D) 7%

Answer:B