how can efficient allocation of capital lead to economic growth?

Solutions

Expert Solution

Yes thats true that the efficient allocation of capital leads to economic growth.

Financial markets other institutions associated with financial markets help in financing decision making and also in the efficient allocation of capital which leads to higher growth.There has been evidences that the financially developed countries have greater allocation of capital which leads towards the development of industries and enhances the ability of the economy to produce more goods and services , this higher productivity spurs growth in the economy. Financial markets improve growth because they improve the allocation of capital. The primary channel towards improved growth is accumulation of physical and human capital.

In highly developed economies, greater allocation of capital is made to the industries which have a very high potential for growth and his in turn leads to economic growth. Countries which do not have well developed financial markets are at a loss as these financial markets help channelise the savings and investments because of improved liquidity that leads to capital accumulation. They also help in the international flow of funds.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Political instability can often lead to economic volatility, reduced growth, and capital flight. For example, in...

Political instability can often lead to economic volatility, reduced growth, and capital flight. For example, in recent times this can be seen in Venezuela. Research the economic situation there (or in another country that has gone through turmoil) and discuss with the group what you learned about the impact of political instability on the economy. Can you offer us any examples of the consequences that instability has brought?

Markets generally lead to efficient use and allocation of resources, but sometimes at the cost of...

Markets generally lead to efficient use and allocation of resources, but sometimes at the cost of equity. Many have observed a trade-off between efficiency and equity, or growth in income and wealth inequality as the economy becomes more efficient. Bill Gates made the following statement: "Yes, some level of inequality is built into capitalism.... It is inherent to the system. The question is, what level of inequality is acceptable? And when does inequality start doing more harm than good?"

Identify ways that an organization can achieve competitive advantage through effective and efficient capital allocation structure...

Identify ways that an organization can achieve competitive advantage through effective and efficient capital allocation structure and management.

Question

how can efficient allocation of capital lead to economic growth?

Solutions

Expert Solution

Related Solutions

Political instability can often lead to economic volatility, reduced growth, and capital flight. For example, in...

Markets generally lead to efficient use and allocation of resources, but sometimes at the cost of...

Identify ways that an organization can achieve competitive advantage through effective and efficient capital allocation structure...

define the efficient allocation of pollution and market allocation. give examples of efficient policies.

Why is comparative advantage important to a nations’ economic growth? How might it lead to specialization...

Why is comparative advantage important to a nations’ economic growth? How might it lead to specialization...

1. (5) How does economies of scale lead to more economic growth if there is free...

What is microfinance, and how can it contribute to economic growth?

How can poor countries achieve economic growth?

3. How can a country experience economic growth?