Chapter 37, Problem 5MCQ

To determine

To know: Factor on which long-run economic growth depends.

Answer to Problem 5MCQ

The correct option is A.

Explanation of Solution

Option A is correct.

Long −run economic growth depends almost entirely on technological change. Technology change is the up gradation of existing technology. The changes in technology leads not only in increase of potential GDP but also increase in the labor productivity of current workforce. Hence, The more is the up gradation of technology, more would be the economic growth in the long-run.

Option B is incorrect.

Rising productivity is a factor of economic growth but no in the long-run. This is because, productivity is long-run becomes stable as the factors affecting it starts giving diminishing returns after a certain point.

Option C is incorrect.

Increased labor force participation is short-term economic growth factor. As labor participation is a variable factor that is only valid for short-run. So, any change in long-run in variable factor like labor is not possible.

Option D is incorrect.

Rising real-GDP per capita is a short-term factor to affect economic growth. In short-term only, Real GDP rises, as it gets nearly stable, it is a phase of long-run.

Option E is incorrect.

Population growth affects economic growth up to a point. The more the skilled population growth is, more is the economic growth. So, knowledge and skill up gradation in population growth affects economic growth.

Economics Concept Introduction

Introduction:

Economic growth is the increase in level of aggregate production of an economy which is manifested in national income. It shows the growth of production of goods and services over a year.