Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose the labour force and (physical) capital stock are growing at a rate of 2.5% and 3% respectively, and the labour share of income is

Suppose the labour force and (physical) capital stock are growing at a rate of 2.5% and 3% respectively, and the labour share of income is 60%. In addition, the total factor productivity is presently constant. We would like to have a very long-run growth rate of real GDP of 3% that will be obtained by changing the growth rate of ONLY one of the following three - the labour force; the capital stock; or total factor productivity. Workers would find all three of these choices equally desirable. Explain your answer with the use of mathematics, economics, and words. (4 points) Note: All the growth rates are annual rates.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding Business

Authors: William NickelsJames McHughSusan McHugh

12th Edition

1259929434, 9781259929434

More Books

Students also viewed these Economics questions