The points on the graph below show economic growth data (in average annual perce

Question

The points on the graph below show economic growth data (in average annual percentages) for various countries.

A.   A higher saving rate leads to higher economic (per capita real GDP) growth.

B.   More labour leads to higher economic (per capita real GDP) growth.

C.   Investment in physical capital has no impact on economic (per capita real GDP) growth.

D.   Less capital leads to higher economic (per capita real GDP) growth.

3.1.   Which of the following statements best explains the trend on the graph above?

Explanation / Answer

3.1.   Which of the following statements best explains the trend on the graph above? A.   A higher saving rate leads to higher economic (per capita real GDP) growth.
A higher saving rate and consequent investement in the physical capital, leades to higher percapita income and percapita real growth rate. This is in accordance with Solow model. B.   More labour leads to higher economic (per capita real GDP) growth.
In the above grapgh the realation is inbetween percapita growth rate and investment, keeping all other factors ( iincluding labor) as constant. C.   Investment in physical capital has no impact on economic (per capita real GDP) growth. Countries who invested more has a higher percapita growth rate.
D.   Less capital leads to higher economic (per capita real GDP) growth. it is not related. as it is evident that the countries with higher capital investment are having a higher growth rate. 3.1.   Which of the following statements best explains the trend on the graph above?

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