Consider an economy characterized by a Cobb-Douglas production function Y = Y = AK "L¹-a, with A = E¹-a, and E grows at a rate gg. The economy is in steady state, with sustained growth. Consider the following two statements: (1) The capital-output ratio is constant; (2) The contribution of capital to output growth in a growth accounting exercise is zero. a. (1) and (2) are both false. b. (1) is true, but (2) is false. c. (1) and (2) are both true. d. (1) is false, but (2) is true.

Consider an economy characterized by a Cobb-Douglas production function Y = Y = AK "L¹-a, with A = E¹-a, and E grows at a rate gg. The economy is in steady state, with sustained growth. Consider the following two statements: (1) The capital-output ratio is constant; (2) The contribution of capital to output growth in a growth accounting exercise is zero. a. (1) and (2) are both false. b. (1) is true, but (2) is false. c. (1) and (2) are both true. d. (1) is false, but (2) is true.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Production And Growth

Section17.1: Economic Growth Around The World

Problem 1QQ

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