Chapter 25, Problem 1QFR

To determine

To explain:

The sources of economic growth suggested by modern economic theory with examples.

Explanation of Solution

According to modern economic theory, basically human capital, natural resources and physical capital

are the main sources of economic growth for modern countries.Growth calculating measures calculate the donation of each of these three variables to the home economy.

Natural resources stock sourceinvolves land and the inputs born naturally inner or outer part of the land such as minerals and wood. These resources help to boost up agro-basedindustries and forest-based industries tourism, etc. These kinds of industriescontribute a lot to economic growth.

Physical capital stock sourceincludes buildings, machinery tools,means oftransformation, and computers. These capitalresourcesassist the production process of output, which ultimately contribute the economy to grow.

Human capitalresourcesare the people themselves who use all the otherresources. Human capital comprises of the labor volume mainly skilled labor, knowledge and skills, innovations etc which results in technological advancement in any economy. By making huge investment on education, training, research and development in order to increase human capital stock per capita GDP can be enhanced to very high levelindicating higher economic growth in modern times.

Economics Concept Introduction

Modern economic theory:

Modern economic theory is distinct from the other theories in the field of economic growth. Modern economic theory focuses mainly on human capital then natural resourcesand finallyphysicalcapital as the sources for economic growth in modern times.