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In a hypothetical economy, assume that Wk=.25 and WL=.75 are the respective contribution/weights of capital and labor respectively. Given the formula G y =W k

In a hypothetical economy, assume that Wk=.25 and WL=.75 are the respective contribution/weights of capital and labor respectively. Given the formula

Gy=WkGk+WLGL+a

%(Q/L)growth=Wk(% K/Lgrowth)+a

Where Giis the growth rate of factor (i), Gyis the growth rate of total output and a is the total factor productivity/technological change.

  1. What is the contribution of total factor productivity to output growth if labor and capital grew at 3% and 2% respectively while total output grew by 5%?
  2. What should be the growth of capital if the total output is to grow at 5.5% given that labor is only growing at 1.5% and total factor productivity is growing at 2.5%?
  3. If capital per person increased by 2% while technological growth increased by 1.5%, what will be the output per person growth?
  4. Suppose that in an economy, capital and labor decreased by 10% and 3% respectively because of war. Technological growth on the other hand remained constant. What would be the calculated growth rate of total output in this economy?

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