## Destinyyyy one year ago Suppose that an economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent.....

1. anonymous

Suppose that an economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent. If labor and capital are the only inputs used in production and capital contributes 25 percent to GDP, then the labor force has risen by _____. Question 10 options: 1) 1.5 % 2) 2% 3) 4% 4) 6% 5) 8%

2. ybarrap

I might be able to help if you tell me the relationships between economy, factor productivity and capital stock Is economy (E) a function of stock (S) and productivity (P)? Something like $$E=\alpha S + \beta P +\delta SP~?$$ Where $$\alpha, \beta~\&~\delta$$ are constants

3. anonymous

My book shows this @ybarrap

4. ybarrap

Ok, so $$\%\Delta Y=\%\Delta\text{TFP}+0.7(\%\Delta L)+0.3(\%\Delta K)$$ Givens: $$\%\Delta Y=6\\ \%\Delta\text{TFP}=4\\ \%\Delta K=2$$ We need to find $$\%\Delta L$$, percent change in the labor force. Using the first equation: $$\%\Delta Y=\%\Delta\text{TFP}+0.7(\%\Delta L)+0.3(\%\Delta K)\\ 6=4+0.7(\%\Delta L)+0.3\times 2\\ \implies \%\Delta L=\cfrac{6-4-0.3\times 2}{0.7}\\$$ Does this make sense?

5. anonymous

Um yes? But I completed this question 3 hours ago. I took a guess and got it right.