Using the Growth Accounting Equation, If the Growth Rate of Output

question 16

Multiple Choice

Using the growth accounting equation, if the growth rate of output is 9 percent, the growth rate of labor is 5 percent, the growth rate of technology is 2 percent, and α = 0.8, then the growth rate of capital can be estimated to be:

• A) 7 percent.
• B) 7.5 percent.
• C) 8 percent.
• D) 8.5 percent.

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Definitions:

Land Account

A type of asset account on the balance sheet representing the cost of land owned by a company.

Accounts Payable

Liabilities of a business that are due to be paid to creditors within a short period of time, typically one year.

Supplies Expense

This refers to the cost recorded for supplies used during an accounting period, not necessarily when they were purchased.

Operating Income

Income generated from normal business operations, calculated by subtracting operating expenses from the gross profit.