Over the past year, an economy's labor supply increased from 100 to 102, its capital stock increased from 1000 to 1030, and its output increased from 500 to 525. All measurements are in real terms

Calculate the contributions to economic growth of growth in capital, labor, and productivity if aK = 0.2 and aN = 0.8.

One Year Ago Today Percent Change
Y 500 525 5%
K 1000 1030 3%
N 100 102 2%

ΔA/A = ΔY/Y - aK ΔK/K - aN ΔN/N
= 5% - (0.2 × 3%) - (0.8 × 2%)
= 5% - 0.6% - 1.6%
= 2.8%
Capital growth contributed 0.6% (aK ΔK / K), labor growth contributed 1.6% (aN ΔN / N), productivity growth was 2.8%.