Question

Please be brief and no more than 3 sentences are expected.

1. Why economic growth differs among countries?
2. Why productivity is considered to be the key determinant of a country’s standard of living?
3. List two factors that determine a country’s productivity.
4. List two policies that can influence a country’s its productivity and growth?

Answer 1

Economic growth differs among countries due to differences in real GDP owing to differences in population rate, level of investment, inflation rates and interest rate differences, capital and labor differences, difference in technology of production etc. So growth rate differs mainly due to differences in factors of production.

Productivity is key dterminant of economic growth because it is only the factors of production like capital, labor which determine the real GDP level and economic growth and hence the level of consumption by people .Higher productivity; higher production; higher real GDP and higher consumption and higher living standards.

The amount of labor which basically includes manpower, population of the country and the capital including human capital, physical capital are the determinants of productivity. The country's level of production is determined by the capital and labor levels which are inputs in production process.

The country's fiscal policy which is basically spending by the government to boost growth impacting  spending level and aggregate demand and monetary policy which is conducted by Central Bank to maintain stability in financial markets help to increase investment level in economy and hence the production level is increased.