Answer to Question #203498 in Macroeconomics for Nkabele Rebecca Ap

Question

4. Which of the following would not necessarily enhance economic growth in South Africa?

a) Technological improvements.

b) Increased labour productivity through on-the-job training.

c) Higher levels of net investment in the economy.

d) Higher levels of government spending that raise local interest rates.

Answer 1

d) Higher levels of government spending that raise local interest rates.

With technological improvements the cost of production reduces because the technology increases efficiency and reduces average cost. Increased worker productivity leads to sustained economic growth. Net investment increases the economy's capacity to produce.

High interest rates increases the cost of borrowing and reduce disposable income thereby limiting the growth in consumer spending. It also leads to appreciation in the exchange rate.