SAU 2013

[ahlashi]

Q44
Aggregate production function is  Y^0.4L^0.6 . Growth rate of output ,capital and labor are 5,8 and 2 percent respectively over a certain period. growth rate accounted for by factor accumulation is
a. 4.4%
b. 0.06%
c. 1%
d.none of the above

please help me out with this

[Dr. Strange]

Couldnt get the production function Because what you wrote is this: Y= Y^0.4 * L^0.6. Is this correct?

[ahlashi]

sorry
the correct production function is
Y=K^0.4*L^0.6

[Dr. Strange]

Answer is 4.4%

Since Y=K^0.4 *L^0.6
log Y=0.4log K+0.6log L
Differentiating ,
1/Y * dY/dt= 0.4*(1/K)dK/dt + 0.6*(1/L)dL/dt
Given,(1/K)dK/dt= 0.08
 (1/L)dL/dt = 0.02
Plugging in we get output growth rate due to factor accumulation =4.4%
Rest 0.6% growth is due to other factors(probably technology growth)