# Briefly explain why initial levels of GDP might influence subsequent economic growth.

Q1

(A) Briefly explain why initial levels of GDP might influence subsequent economic growth.

Economic growth is reflected by an overall improvement in the quality of life in a given country. This may include better health care, a cleaner environment and more freedom in terms of choosing work and leisure activities. During times of economic growth, the overall wealth of a country increases, as do the variety and abundance of goods and services.

Economic growth is not easy to measure. A widely used for economic growth is changes in real gross domestic product (GDP) per capita, the final sales of goods and services in a country per person, adjusted for inflation. Economists track real GDP per capita over time to compare growth among countries and the effects of various factors of economic growth

Consider the effects of an increase in real GDP. Such an increase represents economic growth. Thus, the study of the effects of a real GDP increase is the same as asking how economic growth will affect interest rates.

Economic Growth is an increase in the real level of national output as measured by the annual percentage change in real GDP. It is also defined as a long-term expansion of the productive potential of the economy.

Real GDP measures the value of goods and services produced within the economy adjusted for the effects of inflation. If national output falls we are in an economic recession. If real GDP starts to rise, then the economy is in a recovery phase. An economic slowdown means that the pace of growth is falling - but the economy is still expanding.

The production function is a technical relationship that shows the maximum amount of output that can be produced using specified quantities of inputs given existing technology. It could be expressed formally as:

Y = f (K, L)

Where Y is potential output or GDP; K is the number of physical capital units; L is the number of labour units; the f, function never changes.

And if we use a small amount of them it will be the marginal production high .so a country with a low level of GDP has the potential to achieve fast rates of growth because small changes in the level of national output will be high percentage increases. The coefficient on initial level of GDP measures the percentage rate of

Convergence to the economys long run or target level of income. The interpretation is that initial income has a negative impact on residual growth. So the higher the initial income is the closer to the technological leader and the lower will growth be. Economic growth is the engine through which increases in living standards are generated. The growth of GDP in relation to the growth of the population provides a measure of changes in a country's living standards. GDP per capita could be taken as a measure of a country's productivity although it is more appropriate to express it in per worker terms Economic growth is related to shifts in the aggregate supply of the economy and therefore related to the growth of potential output. The main increases in potential output are attributable to changes in factor supplies like capital and labour and to changes in their productivity.

(B) Using SPSS comment on the statistical association between the initial GDP level and subsequent growth for both period.

bit fit for the graph

Regression

Variables Entered/Removed(b)

Model

Variables Entered

Variables Removed

Method

GDP1950(a)

.

Enter

a All requested variables entered.

b Dependent Variable: rategrowth50to73

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

.868(a)

.753

.742

.80357

a Predictors: (Constant), GDP1950

ANOVA(b)

Model

Sum of Squares

df

Mean Square

F

Sig.

Regression

45.227

45.227

70.040

.000(a)

Residual

4.852

23

.646

Total

60.078

24

a Predictors: (Constant), GDP1950

b Dependent Variable: rategrowth50to73

Coefficients(a)

Model

Unstandardized Coefficients

(A) Briefly explain why initial levels of GDP might influence subsequent economic growth.

Economic growth is reflected by an overall improvement in the quality of life in a given country. This may include better health care, a cleaner environment and more freedom in terms of choosing work and leisure activities. During times of economic growth, the overall wealth of a country increases, as do the variety and abundance of goods and services.

Economic growth is not easy to measure. A widely used for economic growth is changes in real gross domestic product (GDP) per capita, the final sales of goods and services in a country per person, adjusted for inflation. Economists track real GDP per capita over time to compare growth among countries and the effects of various factors of economic growth

Consider the effects of an increase in real GDP. Such an increase represents economic growth. Thus, the study of the effects of a real GDP increase is the same as asking how economic growth will affect interest rates.

Economic Growth is an increase in the real level of national output as measured by the annual percentage change in real GDP. It is also defined as a long-term expansion of the productive potential of the economy.

Real GDP measures the value of goods and services produced within the economy adjusted for the effects of inflation. If national output falls we are in an economic recession. If real GDP starts to rise, then the economy is in a recovery phase. An economic slowdown means that the pace of growth is falling - but the economy is still expanding.

The production function is a technical relationship that shows the maximum amount of output that can be produced using specified quantities of inputs given existing technology. It could be expressed formally as:

Y = f (K, L)

Where Y is potential output or GDP; K is the number of physical capital units; L is the number of labour units; the f, function never changes.

And if we use a small amount of them it will be the marginal production high .so a country with a low level of GDP has the potential to achieve fast rates of growth because small changes in the level of national output will be high percentage increases. The coefficient on initial level of GDP measures the percentage rate of

Convergence to the economys long run or target level of income. The interpretation is that initial income has a negative impact on residual growth. So the higher the initial income is the closer to the technological leader and the lower will growth be. Economic growth is the engine through which increases in living standards are generated. The growth of GDP in relation to the growth of the population provides a measure of changes in a country's living standards. GDP per capita could be taken as a measure of a country's productivity although it is more appropriate to express it in per worker terms Economic growth is related to shifts in the aggregate supply of the economy and therefore related to the growth of potential output. The main increases in potential output are attributable to changes in factor supplies like capital and labour and to changes in their productivity.

(B) Using SPSS comment on the statistical association between the initial GDP level and subsequent growth for both period.

bit fit for the graph

Regression

Variables Entered/Removed(b)

Model

Variables Entered

Variables Removed

Method

GDP1950(a)

.

Enter

a All requested variables entered.

b Dependent Variable: rategrowth50to73

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

.868(a)

.753

.742

.80357

a Predictors: (Constant), GDP1950

ANOVA(b)

Model

Sum of Squares

df

Mean Square

F

Sig.

Regression

45.227

45.227

70.040

.000(a)

Residual

4.852

23

.646

Total

60.078

24

a Predictors: (Constant), GDP1950

b Dependent Variable: rategrowth50to73

Coefficients(a)

Model

Unstandardized Coefficients