Assume That an Economy Described by the Solow Model Is

question 8

Multiple Choice

Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent,labour 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,labour,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:

Net Income

The company's overall earnings following the deduction of all expenses, taxes, and costs from the gross revenue.

Overstated

A condition where the value or quantity of something is represented to be more than it actually is.

LIFO Method

"Last In, First Out" inventory valuation method where the most recent items added to inventory are the first ones considered sold.

Periodic System

A method in accounting where inventory levels are updated in the financial records periodically at the end of a reporting period.