Question 3 Answer
a) Economic growth is the increase in the potential GDP of a country over a period of time usually one year. Economic development refers to the adoption of new technologies, a transition from agriculture-based to industry-based economy, and a general improvement in the living standards of the people of a country.
b) Answers should speak to ways in which government can increase potential production in the country (potential GDP). Answers may include but are not limited to any two (2) of the following:
-Attract investment through creation of a business-friendly environment, lowering taxation and stabilising society as investment will provide funds needed for research, development and new technologies which will make it possible to increase production hence potential GDP.
-Retain skilled and educated citizens – These persons are assets to business development and job creation within the country so efforts should be made by the government to encourage them to remain through provision of benefits – housing benefits, reduction of living expenses and taxation to encourage entrepreneurship.
-Reduce cost of education so persons can invest in their future and become marketable using their knowledge to develop and create new methods of production etc that can increase and improve production.
-Reduce or eliminate waste in the country – ensure quality resources are utilised so that they last long preventing expenditure on the same projects every year and freeing these resources to be used for other projects. Example in fixing of roads so they are not easily damaged during natural disasters.