2.2) The GDP of any country can be divided into two kinds of goods: Capital goods and consumption goods. The proportion of national output devoted to capital goods determines, to some extent the nation's growth rate.
a. Explain how capital accumulation leads to economic growth.
b. Briefly describe how a market economy determines how much investment will be undertaken in each period.
c. Consumption versus investment is a more painful conflict to resolve for developing countries. Comment on that statement.
d. If you were the benevolent dictator of a developing country, what plans would you implement to increase per capita GDP?
Investment in the economy is one of the important components necessary for economic growth. Saving in the economy is equal to the investment in the economy. It is because the money saved by the people today is the future investment in the economy.
Answer and Explanation:
a Capital accumulation means an investment of businesses in capital goods. Investment in capital goods increases the production of goods and services...
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 6