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Q67 (IAS/2013) Economy › Growth, Development, Poverty & Employment › Economic growth theories Answer Verified

Economic growth in country X will necessarily have to occur if

Result
Your answer: —  ·  Correct: C
Explanation

Economic growth is defined as a quantitative increase in the production of goods and services within an economy over a specific period [1]. Capital formation, which involves the creation of physical assets like machinery, infrastructure, and equipment, directly enhances a nation's productive capacity [2]. While technical progress or trade growth in the world economy (Options 1 and 4) can create favorable conditions, they do not guarantee growth in a specific country X unless that country has the internal capacity to utilize them [1]. Similarly, population growth (Option 2) does not necessarily lead to economic growth; it can even hinder per capita growth if not accompanied by sufficient investment in human or physical capital. Therefore, capital formation is the most fundamental internal driver that ensures an expansion of output, making it the necessary condition for economic growth in country X [2].

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 2: Economic Growth versus Economic Development > ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT > p. 22
  2. [2] https://www.sciencedirect.com/science/article/pii/S0165188924001350
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