CFA CFA Level 1 How is C incorrect here? I thought total factor productivity accounts for technology advancement..

How is C incorrect here? I thought total factor productivity accounts for technology advancement..

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    • Avatar of pcunniffpcunniff
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        • CFA Level 1
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        In the production function approach to analyzing economic growth, total factor productivity accounts for:

        A)

        output growth not attributable to growth in labor and capital.

        B)

        capital deepening and any increase in the amount of capital available.

        C)

        technological advances and growth of the labor force.

        Explanation

        The production function as defined as Y = A × ƒ(L, K) where Y is the aggregate output; L = quantity of labor; K = amount of capital available; and A = total factor productivity. Total factor productivity represents output growth not directly attributable to changes in the quantities of either labor or capital, and is thought to primarily reflect technological advances.

        (Study Session 4, Module 14.3, LOS 14.n)

      • Avatar of rahul12rahul12
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          • CFA Level 3
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          Because C has the word “AND growth of the labor force” in it. So it’s incorrect.

          A is the right answer, as TFP relates to output NOT directly attributable to changes in Labor (L) or Capital (K), i.e. mainly tech advances.

        • Avatar of pcunniffpcunniff
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            • CFA Level 1
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            Thanks rahul!

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