Assume That an Economy Described by the Solow Model Is

question 32

Multiple Choice

Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent, labor growing at 1 percent, and technological progress growing at 2 percent. The capital share is 0.3. The growth-accounting equation indicates that the contributions to growth of capital, labor, and total factor productivity are:

• A)0 percent, 1 percent, and 2 percent, respectively.
• B)0.3 percent, 0.7 percent, and 2 percent, respectively.
• C)0.9 percent, 0.7 percent, and 1.4 percent, respectively.
• D)1.8 percent, 0.3 percent, and 0.9 percent, respectively.

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Definitions:

Noncurrent Monetary Liabilities

Long-term financial obligations that are not due within the next 12 months, such as bonds payable or long-term loans.

Present Value

The current value of future money or cash flows, determined by applying a specific rate of return.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Stated Rate

The interest rate expressed in the terms of a loan or bond agreement, not necessarily reflecting the effective interest rate after considering fees or compounding.