1.3 Causes and Consequences of Undesirable Growth

Question 1

What are the causes of weak / negative economic growth?

Answer 1

• falls in autonomous aggregate demand due to any one of its four components (C, I, G and X)
• lack of fixed capital investment
• lack of/fall in quantity or quality of natural resources
• lack of investment in human capital
• lack of technological advancement
• structural rigidities

Question 2

How does a lack of fixed capital investment lead to weak / negative economic growth?