Economics · Macroeconomics
The crucial assumption while arriving at Solow's growth accounting formula is that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1firms use labour and capital up to the points where their marginal products are equal to the real wage and real rental prices respectively.✓
- 2firms follow increasing returns to scale.
- 3there are no improvements in technology.
- 4marginal productivity of labour is zero.
Correct answer
firms use labour and capital up to the points where their marginal products are equal to the real wage and real rental prices respectively.
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