Question

8. A.) Illustrate the impact of a change that occurs in an economy when institutions become more favorable growth.

8. B.) What might this change in institutions look like? Explain in your own words.

Answer 1

8. A)&B)

1. Institutions are a part of financial system of an economy. Some economists believe in critical importance of it in economic growth while some do not believe in.

2. They help in reallocating capital and tend to improve the growth of an economy in restructuring it. These institutions also play a key role in resource distribution.

3. If institutions perform well, investment in the economy goes towards swift growing sectors of the economy paving way to economic growth.

4. These economic institutions are influenced by the allocation of power politically in their aspect of institutional design. Do these political institutions influence those economic institutions? Yes, so a variable known as GDP per capita is taken into account to estimate the influence yearly as we all known that.

5. Political institutions play a key role in poor countries rather than the rich ones and so development of economic institutions say the economic growth will be better in rich when compared to the poorer ones.