Impact of dead capital on economic growth Concept introduction: Economic Growth or rate of growth of GDP - It is the macroeconomic measure of the value of economic output in a country in a given year. Algebraically, the GDP equation is written as: Where Y = GDP , C =Consumption, I = Investment, G = Government, X =Exports and M =Imports. The value of C , I, G and ( X-M ) changes with a change in the method of aggregation of the income. Real GDP- GDP adjusted for inflation/deflation is the Real GDP of the country. It is also called the “constant price”, “inflation corrected” or “constant dollar GDP”. It is the significant economic measure indicating the economic growth and purchasing power in the economy. Algebraically it is expressed as: Where Yr=Real GDP, Y=GDP and D=adjustment factor Dead Capital- It is a measure of the physical and financial assets that are legally non-existent. In other words, it implies the assets that are informally owned but not legally recognized. This asset cannot be bought, sold, valued or used for investment.

Question

Want to see the full answer?

Answer 1

Question

Chapter 18, Problem 18.2LO

To determine

Impact of dead capital on economic growth

Concept introduction:

Economic Growth or rate of growth of GDP- It is the macroeconomic measure of the value of economic output in a country in a given year. Algebraically, the GDP equation is written as:

Where Y=GDP, C=Consumption, I= Investment, G= Government, X=Exports and M=Imports. The value of C, I, G and (X-M) changes with a change in the method of aggregation of the income.

Real GDP- GDP adjusted for inflation/deflation is the Real GDP of the country. It is also called the “constant price”, “inflation corrected” or “constant dollar GDP”. It is the significant economic measure indicating the economic growth and purchasing power in the economy. Algebraically it is expressed as:

Where Yr=Real GDP, Y=GDP and D=adjustment factor

Dead Capital- It is a measure of the physical and financial assets that are legally non-existent. In other words, it implies the assets that are informally owned but not legally recognized. This asset cannot be bought, sold, valued or used for investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

2.) Using the line drawing tool, plot and label the isocost line. Carefully follow the instructions above, and only draw the required objects. FILL IN BLANK d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on ▼ The samedifferently slopedparallel isocost line. The firm will use ▼ moresameless labour and ▼ less the same amount of more capital and produce on ▼ a higher point on the same a lower point on the same a lower a higher isoquant curve.

QK Using the graph on the right, determine how the firm should change the quantity of the production factors in order to reduce the costs. The firm that is producing at point A can reduce its costs for producing 2000 units by employing A. same capital and more labour. B. less capital and more labour. ○ C. less capital and the same labour. D. more capital and more labour. OE. more capital and less labour. C A B Q =4000 Q = 2000 C Isocost line QL

PL Suppose the price ratio is the same along isocost PK lines A and B. In the figure at right, the difference between isocost line A and isocost line B is that A. the total cost is larger along B. B. the total cost is larger along A. OC. labour is relatively more expensive along A. ○ D. the level of output is lower along A. OE. both capital and labour are relatively cheaper along A. Capital B Labour