Prescott Interpreted Fluctuations in the Solow Residual as Evidence That

question 31

Multiple Choice

Prescott interpreted fluctuations in the Solow residual as evidence that:

• A)technology shocks are an important source of short-run economic fluctuations.
• B)the Solow growth model does not converge to a steady-state equilibrium.
• C)endogenous growth models are better explanations of growth than the Solow model.
• D)the marginal product of labour fluctuates more than the marginal product of capital.

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Definitions:

Predetermined Rate

A rate estimated before the start of a period, often used in budgeting and costing processes.

Direct Labour Cost

The wages or salaries paid to employees directly involved in the production of goods or services, excluding indirect labor involved in supportive functions.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined basis such as direct labor hours.

Direct Labour-Hours

The total hours of labor directly involved in the production of goods or services, often used as a basis for allocating overhead costs.