Tutorial sheet 6

Question 1

Economists teach that “there is no free lunch”. As it concerns Economic Growth, the benefits are well known, but what are the costs?

Answer 1

Economic growth brings benefits like higher living standards and more jobs, but the costs include environmental damage, income inequality, overwork, and resource depletion. There can also be inflation if demand outpaces supply. So, while growth improves wealth, it requires balancing trade-offs.

Question 2

Economic Growth can be modeled as an aggregate production function that shows the determinants as inputs.

Answer 2

Economic growth can be modeled with an aggregate production function that shows how output (GDP) is created from inputs like labor, capital, and technology. The key determinants are the quantity and quality of workers (labor), the available tools and infrastructure (capital), and innovations or improvements (technology). By focusing on these inputs, policymakers can boost economic growth through investments in education, infrastructure, and technological advancements.