Question

Let the production function be given by
$Y_t = A_t K_t ^{\alpha} H_t ^{\beta} 𝐿_t^{1−\alpha−\beta}$
where, at time t, $Y_t$ is output, $A_t$ is level of Total Factor Productivity, $K_t$ is physical capital, H is human capital, and L is labour. $\alpha$ = 1/5 and $\beta$ = 2/5 If the growth rate of $Y_t$ equals 10 percent, the growth rate of $K_t$ equals 5 percent, the growth rate of $H_t$ equals 5 percent, and the growth rate of $L_t$ equals 10 percent, then the growth rate of $A_t$ is

• A. 2 percent
• B. 3 percent
• C. 5 percent
• D. 10 percent

Answer 1

Answer: (B)

3 percent

Answer 2

The correct answer is (B): 3 percent