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Q 22.

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Principles of Economics
Found in: Page 496

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Short Answer

Over the past 50 years, many countries have experienced an annual growth rate in real GDP per capita greater than that of the United States. Some examples are China, Japan, South Korea, and Taiwan. Does that mean the United States is regressing relative to other countries? Does that mean these countries will eventually overtake the United States in terms of the growth rate of real GDP per capita? Explain.

This depends on various situations that the US is regressing or not.

See the step by step solution

Step by Step Solution

Step 1. Definition

Gross domestic product (GDP) is referred to as the economic value of all finished goods and services manufactured within a nation during a fixed period of time.

Step 2. Explanation

See the one main point is that the US is a developed country.

When a country gets industrialized or developed it encounters very high growth rates and eventually flattened or compressed. This happens because of diminishing returns of capital.

Step 3. 

Because the US is fully developed and highly industrialized, the growth rates have slowed down just because of diminishing returns to capital. On the other hand, developing countries like China, Japan, South Korea, Taiwan are on the path of industrialization and not fully developed and engaging with the US. The growth rate of developing countries will also decline when they are fully industrialized.

So that’s why the US is not regressing.

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