ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Simultaneous development of a variety of activities, which support one another
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Equal allocation of resources to different sectors
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Different sectors growing at their natural rates of growth
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Uniform rate of growth of output over time
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Detailed explanation-1: -Balanced growth means that the ratio of the capital stock to output does not change. On a balanced-growth path, output and the capital stock grow at the same rate, so the ratio of the capital stock to output is always the same: the growth path of the economy is a straight line from the origin.
Detailed explanation-2: -The balanced growth theory is an economic theory pioneered by the economist Ragnar Nurkse (1907–1959). The theory hypothesises that the government of any underdeveloped country needs to make large investments in a number of industries simultaneously.
Detailed explanation-3: -The Solow model implies that the economy converges to a balanced growth path – a situation where each variable of the model is growing at a constant rate. Next, we consider a Solow model with technical progress.
Detailed explanation-4: -These two sets of goals can Page 2 be achieved by maximising balanced growth of the firm (G), which is dependent on the growth rate of demand for the firm’s products (gD) and growth rate of capital supply to the firm (gC).