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12 March, 05:59

Scenario: Technological Progress and Productivity Growth in Techland In Techland, from 1980 to 2010, holding technology and human capital fixed, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that real GDP per worker actually increased from $40,000 to $320,000. Look at the scenario Technological Progress and Productivity Growth in Techland. What share of the growth rate of real GDP per capita was attributable to higher total factor productivity?

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  1. 12 March, 07:56
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    The growth of the real GDP per capita was 7.18%

    Explanation:

    It is important to establish that:

    Future Value = Present Value * ((1 + r) ^t), given that r is the interest rate and t is the time period

    Real GDP per worker increased from $40,000 to $320,000 in 30 years

    Therefore, we have;

    320000 = 40000 * (1+r) ^30

    (1 + r) ^30 = 8

    1 + r = 8^1/30

    1 + r = 1.0718

    r = 0.0718 = 7.18%
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