Question

2. Discuss how a higher level of entrepreneurship promotes different aspects of macroeconomic performance

Answer 1

SOLUTION :

The entrepreneurship may spur economic development if appropriately supported by the state. And entrepreneurship may also make nations happier – but only up to a point. As nations become happier, their need for entrepreneurship seems to decline. Perhaps relational goods – family and friends – become more important, and too much of an entrepreneurial culture detracts from this. How important is reallocative efficiency? Well, despite being less exciting than the part of productivity driven by breakthrough technological innovations, reallocative efficiency is important enough to drive macroeconomic performance. In fact, a group of leading economists have identified the slowdown in reallocative efficiency in the American economy during the last two decades as the central culprit for the decline in productivity growth that has occurred over this period. entrepreneurship injects the economy with a fresh batch of higher productivity firms, increases competition among existing businesses, and pushes out less-productive onesnew firms are disproportionately responsible for commercializing new innovations, particularly radical innovations that spawn entirely new markets or substantially disrupt existing markets.new and young businesses, not small businesses, are the engine of net job creation in the economy.