Author Question: Given the production function Y = A if output grows by five percent, the capital input grows by five ... (Read 43 times)

bobbie · **on:** Jun 30, 2018

Given the production function Y = A if output grows by five percent, the capital input grows by five percent, and the labor input grows by two percent, calculate the Solow residual.

Calculate the growth rates of output per worker and capital per worker.

Question 2

In the classical model, people hold money because

a. it is a way to save.
b. it makes trade easier.
c. it is the way to measure the value of goods and services.
d. it is an asset.

stillxalice · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The Solow residual = 0.05 - 0.3 0.05 - 0.7 0.02 = 0.021. The growth rate of output per worker is 0.05 - 0.02 = 0.03, which is also the growth rate of capital per worker.

Answer to Question 2

B