The Table Below Represents Freedonia's Macroeconomic Data for 2002 and 2003

question 60

Multiple Choice

The table below represents Freedonia's macroeconomic data for 2002 and 2003. $$\begin{array} { c c c c } \text { Year } & \text { Y } & \mathrm { K } & \mathrm { N } \\\hline 2002 & 2000 & 1700 & 70 \\2003 & 2100 & 1785 & 75 \\\hline\end{array}$$ Suppose that the production function is given by Y = AK^0.25 N^0.75. Between 2002 and 2003, total factor productivity of Freedonia's economy increased by

• A) -1.5%.
• B) 5.0%.
• C) 5.5%.
• D) 12.7%.

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Definitions:

Operating Expenses

Costs that are related to the day-to-day operations of a business, such as rent, utilities, and payroll, excluding cost of goods sold.

Capital Budgeting

The act of strategizing and overseeing a corporation's extensive investments in ventures and assets over an extended period.

Straight-Line Depreciation

A technique for distributing the cost of a physical asset across its lifespan in uniform yearly payments.

Capital Budgeting

The process of making long-term planning decisions for investments in projects and assets, assessing their potential financial benefits.