Question

Answer each of the following prompts with a detailed response using sound economic reasoning and examples. a. What is the most important factor in determining economic growth rates across nations? What can be done to enhance this factor? b. What is the most common statistic to use in tracking a nation’s economic growth rate? c. If Franklandia has an economic growth rate of 4% and Dodgelandia has an economic growth rate of 8%, how much faster will Dodgelandia double real economic output? Use the Rule of 70 to show your work.

Answer 1

a.

·         Availability of capital: availability of capital is regarded as the most important factor in determining economic growth rates across the nations. Many African and Asians countries are abundant in natural and human resources but these countries are unable to exploit these resources owing to unavailability of capital in forms of machinery and plants.

·         Initial it requires more heavy investments. These countries must save and take economic aids from developed countries.

b.

·         Gross Domestic Product (GDP) adjusted for inflation is most common statistic to use in tracking nation’s economic growth rate.

c.

·         Doubling of real economic output = 70/ Growth rate

                                                    = 70/8

                                             = 8.75 years.