Macro Economics Questions

1. Sustained growth is affected both by capital accumulation and technological change, and over the long-term, both are important to an economy. However, the effect of increasing the capital stock is greater than the effect of increasing technology, rendering capital accumulation a more important factor in sustaining long-term growth.

The nature of capital accumulation is to shift the entire production function outward, resulting in sustained increase in growth. Technological change will also result in a change in the production function, but not in a shift of the entire curve (most likely). Since not all industries are affected by technological change, the shape of the production function curve changes, but may not actually shift due to technological innovation (Ruffin & Gregory 39).

2. Although technological change does not shift the production function in the same way as capital accumulation, technology is nonetheless an important factor in long-term growth.

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Category: Economics - M