1.Discuss the four basic elements/ factors in economic growth . 2. Define capita
ID: 1213051 • Letter: 1
Question
1.Discuss the four basic elements/ factors in economic growth . 2. Define capital deepening and explain why it tends to increase the real wage paid to labor and reduce the return earned by capital. 1.Discuss the four basic elements/ factors in economic growth . 2. Define capital deepening and explain why it tends to increase the real wage paid to labor and reduce the return earned by capital. 2. Define capital deepening and explain why it tends to increase the real wage paid to labor and reduce the return earned by capital.Explanation / Answer
(1) The four basic factors of economic growth are:
(a) Human capital
The quality and quantity of the available workforce is extremely important in growth. The higher (lower) the quality and quantity of human capital, the higher (lower) the growth rate.
(b) Natural resources
Higher availablity and endowment of natural resources contribute positively to the economy's growth rate. Many less developed economies sustain their growth on basis of exporting the natural resources. Agricultural economies thrive because they have higher endowment of natural resource.
(c) Capital formation
This factor includes factors of production (excluding human capital and natural resources), like plant, machinery, land, power, transportation and communication. Capital formation raises the availability of capital per unit of labor and increases the capital/labor ratio. The higher (lower) the rate of capital formation, the higher (lower) the rate of economic growth
(d) Technology.
A country's endowment of technology determines its growth rate. The higher (lower) the endowment of technology and the higher (lower) the willingness by its government and/or private sector in developing technological advances, the higher (lower) its labor productivity and the higher (lower) its economic growth rate.
Note: First question is answered.
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