Question

1. Why is China still poor in per capita terms despite having the second-largest economy in the world in terms of real GDP?

2. Does the political freedom existing in democracies always aid economic growth? Why?

3. What is the relationship between savings, capital formation, and consumption?

4. According to Malthus, how does economic growth and population relate to each other?

Answer 1

SOLUTION:-

1. China is still poor pr capita wise despite its economy being the second largest in the world. This is mainly because of the uneven distribution of wealth in nation. The large population of China contributes to its large labor force, since the supply of labour is so vast, the wages are really low. Owing to this fact, China can produce large scale of goods at cheaper rates. The market is, therefore, dominated by the few percent of the economic elites at the cost of the common masses. This has futher lead to corruption, market monopoly, reduced innovations and competitions, etc. which is why the per capita income of individuals are still low where as the top few percentile comprising of the economic elites are earning more than what the common masses are and improving the GDP as a whole while neglecting the general population.

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