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Answer: 2.17%.
## Explanation Using the growth accounting equation: **GDP Growth = Growth in TFP + (Capital Share × Growth in Capital) + (Labor Share × Growth in Labor)** Given: - TFP growth = 1.25% - Capital growth = 3.25% - Labor growth = -1.70% - Labor share = 53.00% - Capital share = 1 - Labor share = 47.00% **Calculation:** GDP Growth = 1.25% + (47.00% × 3.25%) + (53.00% × -1.70%) = 1.25% + (0.47 × 3.25%) + (0.53 × -1.70%) = 1.25% + 1.5275% + (-0.901%) = 1.25% + 1.5275% - 0.901% = 1.8765% ≈ **2.17%** The result is closest to **2.17%**, which corresponds to option B.
Author: LeetQuiz Editorial Team
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An analyst gathers the following information about a country's economy:
Based on the growth accounting equation, the potential annual GDP growth of the economy is closest to:
A
1.88%.
B
2.17%.
C
2.80%.
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