Econ Practice Exam 2

[Tony Nguyen]

Does anyone have any idea how to do this problem from the Practice Exam?

19. Over the past year, productivity grew 1%, capital grew 0%, and labor grew 5%. If the elasticities of output with respect to capital and labor are 0.4 and 0.6, respectively, how much did output grow?

a) 1%

b) 2%

c) 3%

d) 4%

e) 5%

Thanks!

Tony Nguyen
tonylt...@gmail.com
(713) 208-7497

[Trey Watkins]

Labor Elasticity: 0.6 = %change in output/5%

%change in output = 0.03 = 3%  add the 1% productivity to get 4%

That's how I got it.

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[Lavan Reddy]

If i remember correctly,

A= 1.01, K=1.0, N=1.05, K power =0.4, N power=0.6, solve for Y_new

Sent from Lavan Reddy's iPhone

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[Linda Ly]

Use this equation: