Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 22: Problem 1

Why does a country's economic growth rate matter?

Short Answer

Expert verified
A country's economic growth rate matters as it influences the level of employment, income, and standard of living in the country. However, if not managed properly, it can lead to adverse consequences like inflation or an overheated economy.

Step by step solution

01

Definition of economic growth rate

Economic growth rate is the measure of a change in a country's national output of goods and services. It is mostly driven by the forces of supply and demand and technological advancements.
02

Benefits of economic growth

Economic growth leads to increased income levels, improved standard of living, and creates job opportunities. It can also help a government to pay back its international debt or reduce the ratio of debt to GDP.
03

Consequences of no growth or negative growth

If an economy does not grow, it could lead to increased unemployment, lowered standard of living, and potentially a recession. In severe cases, it could lead to the deterioration of social services as tax revenues decrease.
04

Importance of controlling the growth rate

While a certain amount of growth is healthy for an economy, it's also important that the growth rate is kept in check. Too fast growth can lead to economic instability, inflation, and unsustainable resource consumption.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

A columnist in the New York Times observed that "many analysts agree that economic reform, of which integration into the global economy was a key element, has lifted millions of people out of poverty in India." What does "integration into the global economy" mean? How might integration into the global economy reduce poverty in India?

An article in the Wall Street Journal in mid-2017 noted, "Mexico's economy kept up steady growth in the first quarter, expanding for a 15 th consecutive period despite concerns that strained trade and investment relations with the U.S. will bring about a sharp slowdown." During this period, why were some observers concerned about Mexico's economic relations with the United States? Why are these relations particularly important if the Mexican economy is to experience sustained growth?

In China, why may a lower birth rate lead to slower growth in real GDP per capita? Why might high levels of spending on investment in China lead to high rates of growth in the short run but not in the long run?

A column in the Wall Street Journal considered two observations about the U.S. economy: "We live in an era of accelerating technological progress" and "In the years since the recession \(\ldots\) the economy has been growing very slowly." The writer concluded, "Both statements can't be completely correct." Do you agree with the writer's conclusion? Briefly explain.

What is the new growth theory? How does the new growth theory differ from the growth theory developed by Robert Solow?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free