Suppose that, in booms the capital utilization rate rises, while output increases. If economists use growth...
- Suppose that, in booms the capital utilization rate rises, while output increases. If economists use growth accounting by ignoring these developments, what is likely to happen?
A) The contribution to economic growth of growth in productivity is overestimated.
B) The contribution to economic growth of growth in productivity is underestimated.
C) The contribution to economic growth of growth in labor is underestimated.
D) No measurement error occurs.
Homework Answers
Because the capital utilisation rate is increased, then it means the productivity would increase due to increase in the usage of available capital as a result of which economic growth along with this is responsible for productivity growth but when accounting is done the ultimate growth in productivity is only shown by economic growth which means it is overestimated.
Therefore (A) is the answer to this question
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