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Q. 3

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Economics Today
Found in: Page 210

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Short Answer

In the situation described in Problem 9-2, suppose that vocational training during the past year enables the people of this nation to repair all capital goods so that they continue to function as well as new. All other factors are unchanged, however. In light of this single change to the conditions faced in this nation, will the nation's economic growth rate for the current year be negative, zero, or positive?

The rate of economic growth is zero.

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Step by Step Solution

Step 1: Economic growth.

The market value of an economy's goods or services increases or decreases when asset values rise or fall. To measure such growth, statisticians often use the percent rate of increase in real gross domestic product, or real GDP.

Step 2: Capital goods.

If educational advancements during the last year enable the inhabitants of this country to mend all capital goods while keeping all other parameters constant, the country will maintain its current level of capital goods.

As a result, its rate of economic growth will be zero.

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