If Capital and Labor Each Grow 5% in a Year,the

question 48

Multiple Choice

If capital and labor each grow 5% in a year,the elasticities of output with respect to capital and labor sum to one,and productivity grows 2% in the year,by how much does output grow during the year?

• A)2%
• B)3%
• C)5%
• D)7%

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Definitions:

Price Floor

A government or regulatory imposed minimum price above the equilibrium price, preventing prices from dropping too low.

Usury Laws

Regulations designed to protect consumers by capping the interest rate that lenders can charge on credit.

Loanable Funds

The supply of money that savers have made available to borrowers.

Usury Laws

Regulations governing the maximum interest rate that can be charged on loans, intended to protect consumers from excessively high rates.