- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 11. Economic Growth and the Investment Decision
- Subject 5. Theories of Growth

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**CFA Practice Question**

Capital cost in total factor cost is 40% for country A. Its TFP growth rate and labor force growth rate are 2.5% and 1.2%, respectively. Based on the neoclassical model, the country's steady state growth rate is:

A. 5.37%

B. 6.25%

C. 7.45%

**Explanation:**2.5%/(1-40%) + 1.2% = 5.37%.

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**User Contributed Comments**
2

User |
Comment |
---|---|

darbyland |
theta/(1-alpha) + n = steady state growth rate of output (neoclassical model) |

darbyland |
" per capita = theta/(1-alpha) |