Question

2. Economic growth. Two key sources of economic growth have been due to increases in resources and increases in productivity.
a. Please discuss 5 factors that might contribute to falling U.S. GDP growth rates into the future,
b. Explain in detail, what we could do to avoid each of the 5 factors causing our GDP growth rates to fall.
c. Please discuss 5 factors that might contribute to rising U.S. GDP growth rates into the future,
d. Explain in detail, what we could do to cause each of the 5 factors to happen and cause our GDP growth rate to increase. .
e. Do a bit of research into our ability to get more resources and the cost associated with getting the
hardest to recover bits of resources.
f. What could prevent us from “Engineering our way out of the problem”?

Answer 1

a)

1. Fall in Aggregate demand.
2. Fall in investment (infrastructure) in developed countries like USA.
3. Overused resources.
4. Full employment output already attained.
5. Low savings by households and hence less funds for investment

b) The increase in aggregate demand could be achieve by increasing the real wages. Increased wages (income) leads to greater consumption (AD)as well as (savings) so the 1^st and 5^th are catered. Government spending must rise in terms of better social security benefits to the population. Discovering new resources , re-use technology must be developed to increase production. Technological improvements can launch the growth in the economy on a new upward shifted path that will increase the potential level of output in the economy.

c) The rise in output/ economic growth can be attributed to:

1) tax cuts

2) devaluation of the exchange rate

3) increasing labour productivity

4) improved technology

5) lower interest rates:

d) The cuts in tax rates will increase the disposable income of the individuals and will increase the aggregate demand from private consumption and savings. The devaluation of the exchange rate will increase the demand for exports making the goods from USA more competitive. Increased labour productivity and improved technology imply increased aggregate supply and increased output in the economy without implying increased inflation. Lower interest rates will increase the low cost to investment thus increased investment by the infrastructure will increase AD and thus output in the economy.

** please post the other parts as separate questions. Supposed to do only 4 subparts. Thanks and upvote if possible.