Question: Suppose that the production function is Y = AF(K,L). The (unchanging) share of capital in output is 0.5. Suppose that output increases by 5 percent,

Suppose that the production function is Y = AF(K,L). The (unchanging) share of capital in output is 0.5. Suppose that output increases by 5 percent, the labor force increases by 4 percent, and the capital stock increases by 2 percent. What is the Solow residual in this case?

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The Solow residual also known as Total Factor Productivity or TFP is the portion of output not expla... View full answer

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