Question

Suppose two countries have the same growth rates of the capital and labor input stocks. These factors contribute 3 percentage points to their respective​ countries' total output growth rates. Output growth rates are 4 ​% for country 1 and 7 ​% for country 2. Which of the following is the most likely explanation for the difference in total output growth between these two​ countries? A. The two countries have differences in the amount of population growth. B. Country 1 has a higher level of investment in physical capital. C. Country 1 has a lower level of investment in physical capital. D. The two countries have differences in the amount of technology or productivity growth they are experiencing.

Answer 1

D. The two countries have differences in the amount of technology or productivity growth they are experiencing

Step-by-step explanation:

Productivity is the ability of an entity to utilise it's scarce resources in such a way that output is higher than others that have access to the same resources.

Technological growth improves the productivity of a country by making processes more efficient.

In the given scenario country 1 and 2 have the same labour and capital growth. This means the resources they have are equal.

However country 2 has a higher total output growth than country 1.

The logical explanation is that country 2 has advanced technologically more than country 1 thereby increasing its output with the same level of input.