Exam (elaborations)
ECS3709 Assignment 5 (COMPLETE ANSWERS) Semester 2 2024 - DUE 24 October 2024
- Course
- ECS3709
- Institution
- University Of South Africa
ECS3709 Assignment 5 (COMPLETE ANSWERS) Semester 2 2024 - DUE 24 October 2024
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,ECS3709 Assignment 5 (COMPLETE ANSWERS)Semester 2 2024 - DUE 24 October 2024; 100%
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SECTION A [20 Marks] A1 Comparative Living Standards,
Savings, and Economic Growth (a) Discuss how the
measurement of living standards between countries can
influence our understanding of economic growth. (6) (b) Using
real life examples, explain the role of savings in promoting
economic growth and how differences in savings rates between
countries might affect their long-term growth prospects. (4) A2
Technological Progress, Unemployment, Inequality, and
Economic Growth Questions (a), (b) and (c) are based on the
following table: (a) Using the data provided in the table, discuss
the relationship between technological progress and economic
growth. (6) (b) Based on the information in the table, explain
how technological progress might affect income inequality in
these countries. (2) (c) Mention and explain any two potential
determinants of technological progress that could explain the
differences across countries. (2)
A1. Comparative Living Standards, Savings, and Economic
Growth
(a) How the Measurement of Living Standards Between
Countries Can Influence Our Understanding of Economic
Growth (6 marks)
,Living standards are often measured by Gross Domestic
Product (GDP) per capita, which gives an indication of the
average income per person in a country. However, relying solely
on GDP per capita can present an incomplete picture of
economic growth due to several factors:
1. Cost of Living Differences: GDP per capita does not
account for the differences in the cost of living across
countries. For example, two countries may have similar
GDP per capita figures, but if one country has a much
lower cost of living, its citizens may experience a higher
standard of living.
2. Income Distribution: Economic growth may lead to higher
GDP per capita, but if the wealth is concentrated in the
hands of a few, the majority of the population might not
experience improved living standards. Countries with
significant income inequality, like the U.S., may show
economic growth while many people still face economic
hardship.
3. Non-Monetary Factors: Measures such as the Human
Development Index (HDI), which considers education, life
expectancy, and income, provide a broader perspective on
living standards. For example, countries like Norway might
rank higher in living standards due to strong social
services, despite a relatively lower GDP per capita than the
U.S.
, 4. Sustainability of Growth: Measurement of living standards
should also consider sustainability. Short-term economic
growth achieved by exploiting natural resources may raise
GDP but degrade long-term living standards, as seen in
some oil-producing nations.
Thus, differences in how living standards are measured can lead
to different conclusions about the impact of economic growth
on the quality of life.
(b) Role of Savings in Promoting Economic Growth and Its
Impact on Long-Term Growth Prospects (4 marks)
Savings play a crucial role in promoting economic growth by
providing the necessary funds for investment in productive
activities. This relationship can be understood through the
following points:
1. Investment in Capital: Higher savings rates allow for
greater investment in infrastructure, technology, and
education, which are critical for boosting productivity and
long-term growth. For instance, China’s high savings rate
has enabled it to fund extensive investments in
manufacturing and infrastructure, driving its rapid
economic growth.
2. Funding Innovation and Technological Progress: Savings
provide the capital needed for research and development
(R&D) and technological innovation. Countries with higher
savings can invest in cutting-edge industries, as seen in
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