Answer to Question #234736 in Macroeconomics for Soma

Question

a. Many countries, including Pakistan, import substantial amounts of goods and services from other countries. However, economists claim that a country can enjoy a high standard of living only if it can produce a large quantity of goods and services itself. Can you reconcile these two facts? (1.5 Marks, Maximum 100 words).
b. Given the production function Y= AF (L, K, H, N), explain the determinants of productivity. (1.5 Marks, Maximum 100 words).
c. Population growth has a variety of effects on productivity. Explain this statement and justify your answer. (1.5 Marks, Maximum 200 words).

Answer 1

a) A nation's production of own products and the living standards of people aer directly related. In this regard, when a country produces goods, it reduces importation of the same goods, enabling it to gain a comparative advantage over others countries. The commodities are created at a relatively lower opportunity cost, enabling to boost the living standards of its citizenry as it enables the government to export products and earn revenue. The income earned is used to improve infrastructure and other social amenities of its people.

b) L, K, H, N represents the four determinants of productivity, including physical capital, human capital, natural resources, and technological knowledge.

Physical capital - This entails stock of equipment and resources utilized to produce goods and services.

Human capital - Includes to the knowledge and skills that workers exhibit after training, education, and experience.

Natural resources - Refers to the inputs of production of commodities that are naturally occurring.

Technological knowledge refers to the society’s understanding or level of know-how in the processes of producing good and services.

c) Increased population has both negative and positive effects on a country's economy. In regards to the positive perspective, the population can be utilized in the organization to increase production and innovation in an economy. However, its adverse effects is that increased population constraints resources due to overdependence. This tends to hamper savings per capita, retarding the overall growth of physical capital per worker