- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 10. Aggregate Output, Prices, and Economic Growth
- Subject 7. Economic Growth and Sustainability
CFA Practice Question
An economics student has estimated the following growth-accounting equation from historical data based on the Solow growth model:
Growth in potential GDP = 2.2 + 0.42 x growth in labor + 0.38 x growth in capital
What's wrong with the equation?
Correct Answer: 042 + 0.38 ≠ 1
The labor share and the capital share should add up to 1.
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