Suppose K and L grow at constant rates given by $\bar { g } _ { k }$ and $\bar { g } _ { L }$'
What is the growth rate of y if $y = \frac { k ^ { e } } { l ^ { e } }$ ?
A) $g _ { y } = a \bar { g } _ { X } + a \bar { g } _ { L }$
B) $g _ { y } = a \left( \bar { g } _ { X } + \bar { g } _ { L } \right)$
C) $\bar { g } _ { y } = a \left( \frac { \bar { g } _ { X } } { \bar { g } _ { L } } \right)$
D) $a \left( \bar { g } _ { X } - \bar { g } _ { L } \right)$
E) $\bar { g } _ { y } = a \bar { g } _ { L } + ( 1 - a ) \bar { g } _ { L }$

Question

Quizplus · Accepted Answer

The growth rate of a ratio of two variables is the difference in their growth rates. Here, $y = \frac{k^e}{l^e}$, so the growth rate of $y$ is $e(\bar{g}_k - \bar{g}_l)$.

Suppose K and L Grow at Constant Rates Given By \bar