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Economic growth is driven oftentimes by consumer spending and business investment. As businesses have access to credit, they might finance a new production facility, buy a new fleet of trucks, or start a new product line or service. Banks, for example, lend money to companies and consumers. Small businesses tend not to have the same liquidity and cash reserves of larger corporations. Infrastructure spending is designed to create construction jobs and increase productivity by enabling businesses to operate more efficiently. 3. B) Economic growth rates tend to be higher in countries where the government enforces property rights. Economic stimulus refers to attempts by governments or government agencies to financially kickstart growth during a difficult economic period. U.S. Congress. Growth in productivity, helped by supply-side reforms. Accessed Oct. 2, 2020. Economic growth rate = [(Real GDP t /Real GDP t-1) -1] x 100%. The United States has about 4% of the world’s population, so we … 31. 3) Per capita income suffers from the limitation of averages. (d) Technological Development: Refers to one of the important factors that affect the growth of an economy. Natural resources: B. Three factors can create economic growth: more capital, more labor, and better use of existing capital or labor. Many forces contribute to economic growth. Check all that apply. Ideally, these consumers spend a portion of that money at various businesses, which increases the businesses' revenues, cash flows, and profits. Get an answer to your question “Which of the following are characteristics of economic growth? Accessed Oct. 2, 2020. Subprime mortgages, which are high-risk mortgages to borrowers with less-than-perfect credit, began to default in 2007. Economic growth is an increase in the production of goods and services over a specific period. Which of the following explains the term economic growth? ... Increase the amount of foreign currency kept on reserve in U.S. banks. an increase in the quantity of capital. If a government wanted to use monetary policy to increase economic growth, which of the following steps should be taken? We call this economic expansion. The growth that results from a decrease in the population growth rate an increase in the number of goods ...” in History if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions. For example, when roads and bridges are abundant and in working order, trucks spend less time sitting in traffic, and they don't have to take circuitous routes to traverse waterways. This period of economic growth was caused by 1. Increase in per capita production. An increase in economic growth Saving and investment in physical capital does which of the following? In the long run, the most important source of increase in a nation's standard of living is a: a) zero rate of population growth. See the following feature about girl’s education in low-income countries for an example of how human capital, physical capital, and technology can combine to significantly impact lives. Increases in capital goods increase labor productivity. Deregulation relaxes the rules imposed on businesses and have been credited with creating growth but can lead to excessive risk-taking. Question 2 1 / 1 point. 5. A sustained expansion of production possibilities measured as the increase in real GDP over a given period is which of the following? If consumers are buying homes, for example, home builders, contractors, and construction workers will experience economic growth. One can define economic growth as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. "H.R.1 - American Recovery and Reinvestment Act of 2009." A) increases in the price level B) the growth of capital and labor productivity C) the growth of the labor force D) the growth of the capital stock. b) introduction of new technology in the manufacturing sector. This shows that in the 1980s UK economic boom, there was an increasing deficit in the balance of goods and services. It's important to study how an economy grows, meaning what or who are the participants that make an economy move forward. 4. A stimulus check is money sent to a taxpayer by the U.S. government to stimulate the economy by providing consumers with some spending money. A substantial portion of economic growth is driven not by big business, but by small and medium-sized businesses. Economic growth is one of the most important indicators of a healthy economy. In the United States, economic growth is driven oftentimes by consumer spending and business investment. asked Jul 4, 2016 in Economics by Johan. Low global inflation, which created a period of economic stability. Which of the following factors has been the dominant source of economic growth in the U.S. (except in 1973-1995)? As a result, stock prices rise. principles-of-economics; 0 Answers. Accessed Oct. 2, 2020. Economic growth has two meanings: Firstly, and most commonly, growth is defined as an increase in the output that an economy produces over a period of time, the minimum being two consecutive quarters. In this article are a few of the measures that are often employed to increase and promote economic growth. The stimulus was designed to help create construction jobs that were hit hard due to the impact from mortgage crisis on residential and commercial construction.. Additionally, infrastructure spending creates jobs as workers must be hired to complete the green-lighted projects. government spending. labor productivity. The Obama White House Archives. This increases the wealth of the country and its population. As with any stimulus used to spur economic growth, it's often difficult to pinpoint how much growth was created by the stimulus and how much was generated by other factors and market forces. d) an increase in the proportion of the population that is college educated. 13. Labor productivity growth depends on all of the following except what? an increase in the quantity of money. "The Highlights of Tax Reform for Businesses." If the recipe for economic growth is to succeed, an economy needs all the ingredients of the aggregate production function. Import the world’s best scientists. Inward investment helped create new jobs and better labour relations. Increase in per capita production b. Brings economic growth, but it does not bring growth in real GDP per person unless labor becomes more productive. The bill cost $1.5 trillion and is designed to increase economic growth for the next ten years.. New technology, especially one which increases production and output, contributes significantly to economic growth. b) high rate of economic growth. Population growth does which of the following? Third world countries aren't usually rich in human capital. 2. Economic growth is an increase in the production of goods and services in an economy. By using Investopedia, you accept our, Investopedia requires writers to use primary sources to support their work. During the Great Recession, the Obama administration, along with Congress proposed and passed The American Recovery and Reinvestment Act of 2009. The stimulus package was designed to spur economic growth in the economy since business and private investment was waning. Increase the amount of capital per worker and increase labor productivity Economic development means economic growth plus more desirable changes that must occur to raise the levels of living of the people at large. Which of the following explains the term economic growth? c. Increase government spending on public works projects. Economic growth would increase as a result of all of the following except: a) increase in labor productivity. However, there is no single factor that consistently spurs the perfect or ideal amount of growth needed for an economy. An increase in the quantity of labour doesn't always lead to economic growth. 6. b) high rate of economic growth. Which of the following is a determinant of productivity? As the country’s GDP is increasing, it is more productive which leads to more people being employed. Various personal income tax brackets were lowered as well. One of the biggest impacts of long-term growth of a country is that it has a positive impact on national income and the level of employment, which increases the standard of living. Tax cuts and tax rebates are designed to put more money back into the pockets of consumers. Capital formation increases the availability of capital per worker, which further increases capital/labor ratio. In the long run, the most important source of increase in a nation’s standard of living is a: a) zero rate of population growth. Economic growth is driven oftentimes by consumer spending and business investment. For example, the construction of a new highway might lead to other investments such as gas stations and retail stores opening to cater to motorists. c) high rate of consumption. Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500. Other factors help promote consumer and business spending and prosperity. Aggregate hours growth depends on all of the following except what? Economic growth is measured by an increase in gross domestic product (GDP), which is defined as the combined value of all goods and services produced within a country in a year. Proponents of deregulation argue tight regulations constrain businesses and prevent them from growing and operating to their full capabilities. … U.S. Congress. Economic growth is the increase in the market value of the goods and services produced by an economy over time. Tax cuts and rebates are used to return money to consumers … Politicians, world leaders, and economists have widely debated the ideal growth rate and how to achieve it. Infrastructure spending occurs when a local, state, or federal government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. "Executive Office of the President Council of Economic Advisers: The Economic Impact of the American Recovery and Reinvestment Act of 2009 Fourth Quarterly Report July 14, 2010," Pages 2-3, 6. Which of the following countries achieved higher economic growth, in part by mandating a reduction in population growth? To be most accurate, the measurement must remove the effects of inflation. Positive growth means an increase in the production of goods and services in the economy. Congressional Research Service. In 2017, the Trump administration proposed, and Congress passed the Tax Cuts and Jobs Act. The legislation lowered corporate taxes to 20%— the highest corporate income tax rate was 35% before the bill. You can learn more about the standards we follow in producing accurate, unbiased content in our. 0 votes. d) an increase in the proportion of the population that is college educated. All of the following can lead to economic growth except an increase in the level of skills of the labor force. Countries A and B are exactly similar in terms of resources and technology. One of the measures of human capital is education. All of these actions increase productivity, which grows the economy. c) an increase in the average wage rate paid to workers. Having more cash means companies have the resources to procure capital, improve technology, grow, and expand. ... View Answer Workspace Report Discuss in Forum. Economic growth determinants. Technological advances allow more output from the same amount of capital. Answer :- c. 39. The Obama stimulus as it's commonly referred to included federal government spending exceeding $80 billion for highways, bridges, and roads. This, in turn, slows production and hiring, which inhibits GDP growth. It is also capable of spawning new economic growth. Increased economic growth tends to cause an increase in spending on imports, therefore, causing a deterioration on the current account. Select the correct answer using the codes given below: a) 1 only. A. Businesses also drive the economy when they hire workers, raise wages, and invest in growing their business. Consequently, the productivity of labor increases, which ultimately results in the increase in output and growth of the economy. Economic growth creates more profit for businesses. a. In 2016 – 240 years after independence – GDP per capita has increased more than 28-fold to $53,015. "The Economic Effects of the 2017 Tax Revision: Preliminary Observations," Pages 1, 9. Economic growth can be defined as a persistent increase in the real Gdp of a country overtime. d) 1, 2, and 3. A company that buys a new manufacturing plant or invests in new technologies creates jobs, spending, which leads to growth in the economy. Tax cuts and rebates, proponents argue, allow consumers to stimulate the economy themselves by imbuing it with more money. It's important to study how an economy grows, The American Recovery and Reinvestment Act of 2009, H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, The Highlights of Tax Reform for Businesses, The Economic Effects of the 2017 Tax Revision: Preliminary Observations, H.R.1 - American Recovery and Reinvestment Act of 2009, Executive Office of the President Council of Economic Advisers: The Economic Impact of the American Recovery and Reinvestment Act of 2009 Fourth Quarterly Report July 14, 2010. A) Generally speaking, higher levels of saving will lead to higher levels of investment and capital formation and, therefore, to greater economic growth. b) 2 only. Many economists cite that there was a lack of regulatory oversight leading up to the financial crisis of 2008. GDP per capita in the USA at the eve of independence was still below $2,000, adjusted for inflation and measured in prices of 2011 it is estimated to $1,883. Capital investment decreases per capita real GDP. However, economists who favor regulations blame deregulation and a lack of government oversight for the numerous economic bubbles that expanded and subsequently burst during the 1990s and early 2000s. Supply-side theory holds that economic growth stimulus is spurred through supply-side fiscal policy targeting variables that lead to supply increases. Increasing the growth rate of GDP per capita and sustaining this growth rate in an economy can B) increase standards of living. a new oil discovery. Which of the following are true of capital as a determinant of economic growth? "H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018." An increase in labor productivity would lead to which of the following? Also we will critically examine how much inequality is justified on the basis of incentives to work more, to acquire skills and education and to promote more saving for increasing the rate of economic growth. The spending and business investments, in turn, have positive effects on the companies involved. 2. The growth of labor productivity depends on all of the following except what? The second meaning of economic growth is an increase in what an economy can produce if it is using all its scarce resources. Physical capital/worker, human capital/worker, natural resources/ worker. The trickle-down theory states that tax breaks and benefits for corporations and the wealthy will make their way down to everyone. Tax cuts and rebates are used to return money to consumers and boost spending. Economic growth, the process by which a nation’s wealth increases over time. c) 1 and 3 only. Higher economic growth also leads to extra tax income for government spending, which th… To reap the benefits of technological change, which of the following must occur? Accessed Oct. 2, 2020. Economists who favor infrastructure spending as an economic catalyst argue that having top-notch infrastructure increases productivity by enabling businesses to operate as efficiently as possible. A rise in house prices, which helped increase consumer spending. Investopedia uses cookies to provide you with a great user experience. Question 2 1 / 1 point. It became a centerpiece of economics in the United States under the Reagan administration in the 1980s, when the federal government deregulated several industries, most notably financial institutions. d. Print a larger amount of money to increase the money supply. Many economists credit Reagan's deregulation with the robust economic growth that characterized the U.S. during most of the 1980s and 1990s. The accumulated skill and knowledge of people drives economic growth through which of the following. An increase in the productivity of labor leads to economic growth. This is because an increase in production or output increases economic growth. These include white papers, government data, original reporting, and interviews with industry experts. Stimulating the Economy With Deregulation, Using Infrastructure to Spur Economic Growth. An increase in aggregate labor hours would lead to which of the following? Internal Revenue Service. b. Unfortunately, recessions are a fact of life and can be caused by exogenous factors such as geopolitical and geo-financial events. The offers that appear in this table are from partnerships from which Investopedia receives compensation. The mortgage industry collapsed, leading to a recession and subsequent bailouts of several banks by the U.S. government. Saving and investment in physical capital does which of the following? The longest period of economic expansion on record was from 1992 – 2007. an increase in population. Deregulation is the relaxing of rules and regulations imposed on an industry or business. Which one of the following does NOT contribute to economic growth? 2) Rate of economic growth is not known. Why would a politician undertake an economic policy that increases the growth rate but ultimately decreases the growth level? protection of private property rights. Accessed Oct. 2, 2020. China 8. capital investment. Market dynamics are pricing signals resulting from changes in the supply and demand for products and services. The following chart shows economic growth in the USA adjusted for inflation. However, the growth also extends to those doing business with the companies, including in the above example, the bank employees and the truck manufacturer. Other things the same, which of the following would increase productivity? Although the term is often used in discussions of short-term economic performance, in the context of economic theory it generally refers to an increase in wealth over an extended period.. Growth can best be described as a … Infrastructure includes roads, bridges, ports, and sewer systems. Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation. Which of the following is false? Meanwhile, negative growth means a decrease in the production of goods and services. Governments and banks can increase economic growth by ensuring that these firms have access to funding. Among the following determinants of growth, which is a non-economic factor? 9. a. New regulations were implemented in the years to follow that imposed increased capital requirements for banks, meaning they need more cash on hand to cover potential losses from bad loans. The level of economic growth can be either positive or negative. 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