Which of the following is a characteristic of the 'Solow Residual'?
A. It measures the contribution of total factor productivity growth to output growth
B. It is always equal to zero
C. It measures only the contribution of capital
D. It measures only the contribution of labour
Answer: Option A
Solution (By JKSSB Mock Tests)
The Solow residual is the part of output growth that remains after accounting for the contributions of capital and labour inputs; it is commonly interpreted as a measure of total factor productivity growth.
Explanation:
Terms of trade measure the relative prices of a country's exports to its imports, usually expressed as an index. An improvement means more imports can be obtained per unit of exports.
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