What is the Solow residual and how does it behave over the business cycle? What factors cause the Solow residual to change?

Number describing productivity, which is pro-cyclical and is a function of labor, capital and labor productivity.

Explanation:

Solow's residual is a number describing empirical productivity growth in an economy during years or decades. Solow's residual is pro-cyclical, but not so much as labor input. the fall of productivity in recession often comes as a result of high unemployment. Solow model measures productivity as a function of capital, labor and the productivity of that labor. Therefore, they all should be taken into consideration when calculating the annual aggregate output.

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