Which contributes the most towards the economic growth of a country 1. Labor hours 2. Capital 3. Tech. I think Tech?
well, 2 and 3 make 1 more effective, so, lets rule out 1. you can have tons of 2, but if you don’t have 3, there’s diminishing returns to 1 and 2. I would say 3. Partly because CFAI texts say it has had the largest impact, and because intuitively it seems right. Also, seems like a 1/3 rule question could take the place of this on exam day…or be a numerical version of the same question.
TDIGZ Wrote: ------------------------------------------------------- > well, 2 and 3 make 1 more effective, so, lets rule > out 1. > > you can have tons of 2, but if you don’t have 3, > there’s diminishing returns to 1 and 2. > > I would say 3. Partly because CFAI texts say it > has had the largest impact, and because > intuitively it seems right. > > Also, seems like a 1/3 rule question could take > the place of this on exam day…or be a numerical > version of the same question. I would say 2 only because without capital, how are you going to fund R&D in in the tech sector to keep innovating?
I see what you are sayig, but profits drive innovation (new growth). Not all inventors work in an R&D department, and it only takes one new technology (electricity, the light bulb, whatever) to spur a lot more economic growth. The money/physical capital required to produe the innovations is undoubtably essential, and any reasonable person would ASSUME you had the capital required to produce the technology.
TDIGZ Wrote: ------------------------------------------------------- > I see what you are sayig, but profits drive > innovation (new growth). Not all inventors work in > an R&D department, and it only takes one new > technology (electricity, the light bulb, whatever) > to spur a lot more economic growth. The > money/physical capital required to produe the > innovations is undoubtably essential, and any > reasonable person would ASSUME you had the capital > required to produce the technology. Seems like the classic question, which cam first the chicken or the egg. For an estabilished company profits will drive innovation. For a startup company, it will be the capital that will drive it.
capital and labor only provides 1/3 contribution to real GDP. 2/3 is technology. The absorption of new technologies is what allows Asia like Singapore and Japan to catch up. Isn’t this in the LOS?
lilzany is correct. capital is only 1/3 of labor/hr…the remaining 2/3 is tech
First of all, rule out choice A. Economic growth is defined as increase in per capita income - which is output per labor hour. Increase in labor hours would increase output but not necessarily per capita. that leaves us with choices B and C. As others have pointed out, x% increase in capital would lead to x/3% economic growth. Hence the true driver for growth is technology.
I would second TDIGZ and AMCC here. At a given level of technology, if more & more capital per labor hour is added, the real GDP will increase but at a decreasing rate. It means without advancement in technology capital per labour hour exhibit diminishing returns. On the other side, growth in technology results in upward shift in productivity curve, which means real GDP (per labor hour) will increase for every amount of capital per labour hour. So I would say primary driver of economic growth is Technology.