Q1 comment on the history of India’s fiscal deficit and
what does it indicate about govt policies and state of
economy? in three reference points 1991 pre-1991 post-1991 Q2. Long term growth depends on total factors of production and labour market, using the experience of Us and France, explain the state of China? Long term growth depends on total factors of production and labour market and which will help to analyze the state of China this can be explained with the help of: - Difference between USA’s and France’s history which showed that (1) total factor productivity of France compared to USA reduced, (2) France never caught up in terms of GDP per capital and (3) total labour hours per capita was high for France initially but reduced with increasing unemployment. This happened due to (1) insurance program which discouraged individuals from seeking work, (2) high marginal tax rates making additional working hours less interesting and (3) less incentive to hire new workers because of high minimum wage rate and legal restrictions. These were the few reasons why construction industry was successful in USA and not in France between 1950 to 2000. The Solow growth model explains long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity, commonly referred to as technological progress. For example, USA had a strategy of capital accumulation in which with time being more investment made it into capital formation.
Different policies and measures will have a major role in deciding the state of China such as:
1. If GDP of China was in an increasing state then it would have
been good for the construction company as it will increase the high standard of living and hence the consumption. 2. Already having a high population growth which boost the demand of construction industry. 3. High economic growth and High rate of investment hence helpful in capital formulation 4. If China makes it economy according to free market principles and opening up trade and investment with the West then it will lead to significant increase in economic growth and raise living standards 5. Adopting the one-child policy might affect the economic growth because this will decrease the working age population hence less labour to work and produce. 6. From 1958 to 1962 the Chinese living standards fell by 20.3%, and from 1966 to 1968, they dropped by 9.6%. which could lead to less interest in construction industry and being less successful like France. 7. It was given that doing business was difficult in China as compared to USA and France due to regulatory environment hence making it difficult to put up new technology.
(Modern Approaches in Geophysics 15) Frank Scherbaum (Auth.) - of Poles and Zeros - Fundamentals of Digital Seismology (2001, Springer Netherlands) PDF