Business Organizations Reading Questions

Page 269: -What is economic growth, and how is it measured? Economic growth refers to the increase in a country's production of goods and services over time. It is measured by the percentage change in real Gross Domestic Product (GDP), which accounts for inflation and provides a more accurate reflection of an economy’s growth. -What are the main factors that contribute to economic growth? The key factors contributing to economic growth: Capital Stock: More investment in machinery, tools, and infrastructure enhances productivity. Labor Force: A larger, well-educated workforce leads to higher economic output. Technological Advancements: Innovations improve efficiency and enable the production of more goods and services. Human Capital: A skilled and educated workforce increases productivity and innovation. Page 271: -How does technological advancement drive economic growth? Technology improves productivity by making production processes more efficient. New technologies allow for faster, cost-effective production and increase output while reducing resource waste. -Why is human capital important for economic growth? Human capital, which includes education, skills, and experience, is essential for increasing productivity. A well-trained workforce can adapt to new technologies and contribute to innovation. -What is capital deepening, and how does it affect economic growth? Capital deepening occurs when there is an increase in capital per worker, such as providing more machinery or advanced tools. This leads to higher productivity, economic expansion, and improved wages. Page 275: -How do savings and investment contribute to economic growth? Higher savings allow banks to lend more for business investments. Investments in capital goods, like factories and equipment, boost production capacity, leading to economic expansion. -What government policies can promote economic growth? Infrastructure Development: Roads, bridges, and communication systems facilitate business activities. Education and Training: Investing in human capital enhances productivity. Research and Development: Encouraging innovation leads to technological advancements. Tax Incentives: Reducing business taxes encourages investment. Page 277: -How do institutions affect economic growth? Strong institutions provide a stable legal and political environment, protect property rights, and enforce contracts. A well-functioning financial system ensures efficient capital allocation, promoting economic stability and growth. Page 281: -What is growth accounting, and how is it used? Growth accounting breaks down the contributions of labor, capital, and technological progress to economic growth. Economists use it to analyze which factors drive productivity increases. -What are the potential causes of a productivity slowdown? Reduced Investment: Less spending on new capital leads to slower growth. Technological Stagnation: A slowdown in innovation reduces efficiency gains. Labor Market Issues: Skill mismatches and workforce aging can limit productivity. Page 285: -What is the convergence hypothesis in economic growth? The convergence hypothesis suggests that poorer countries will grow faster than wealthier ones, eventually catching up due to their ability to adopt existing technologies and benefit from foreign investments. -How does globalization influence economic growth? Globalization promotes economic growth by increasing trade, foreign direct investment, and access to new technologies. It enables countries to specialize in industries where they have a comparative advantage. Page 287: -What environmental challenges can limit economic growth? Pollution: Air, water, and land pollution harm public health and productivity. Climate Change: Extreme weather and rising sea levels can disrupt industries. Page 289: -How does economic growth affect income inequality? Economic growth can either reduce or widen income inequality. If wealth is distributed fairly through wages and social programs, inequality decreases. However, if growth benefits only the wealthy, inequality rises. Page 294: -What role does innovation play in long-term economic growth? Innovation creates new industries, improves productivity, and enhances efficiency. It drives long-term economic expansion by developing new products and improving existing processes. -How do demographic changes influence economic growth? Aging Population: A shrinking workforce can slow economic expansion. Migration: Skilled immigration boosts labor supply and productivity. Population Growth: A larger population can increase demand but also require more resources. Page 296: -How does education contribute to economic growth? Education enhances human capital, increasing worker productivity and innovation. A highly skilled workforce attracts investments and drives technological advancements. -Why is infrastructure important for economic growth? Infrastructure such as roads, power supply, and telecommunications enables efficient production, transportation, and communication, reducing costs and enhancing productivity. Page 299: -What is technological diffusion, and how does it affect global economic growth? Technological diffusion is the spread of innovations across countries. It allows developing nations to adopt new technologies, boosting productivity and accelerating economic development.