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What causes a change in the Solow residual in economic theory?

A. Changes in population growth rates.
B. Variations in the rate of technological progress.
C. Fluctuations in government spending.
D. Shifts in consumer preferences.

User DarkZero
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Final answer:

Variations in the rate of technological progress cause a change in the Solow residual in economic theory.

Step-by-step explanation:

In economic theory, a change in the Solow residual, also referred to as total factor productivity (TFP), can be caused by variations in the rate of technological progress (B). When technological advancements occur, it leads to an increase in TFP and thus a change in the Solow residual. This means that even if we measure the growth in physical capital and human capital, the remaining growth that cannot be explained by these inputs is attributed to technological progress.

User Micros
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