Suppose the Production Function in an Economy Is Given by Y

question 90

Essay

Suppose the production function in an economy is given by Y = AK⁰.³ L⁰.⁷,where Y is output,K capital,L labour and A measures productivity.If K = 20 and L = 80 and Y = 100:
a.Find the Solow residual.
b.Find the Solow residual for next year when Y = 120.
c.What is the productivity growth in year 2 measured by the Solow residual.
d.How do capital and labour utilization rates affect Solow residual?

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