E+D Economies - Education and Skills

Question 1

Constrains because

Answer 1

• Low human capital = less productive = LRAS shift in = limiting economic growth
• Low human capital = lower paid jobs = less income tax revenue = less gov spending on healthcare = limiting development

Question 2

Fix

Answer 2

• Improved education - e.g build more schools
• ^^ higher human capital - higher productivity - higher growth and development
• ^^ higher human capital - higher paying wages - higher income tax rev - spending on healthcare = increase development

Question 3

Eval

Answer 3

• Improving education won’t necessarily increase growth or development
• short run - kids not working for families - decreasing family income - decrease income tax rev - decrease gov spending on healthcare
• ^^ decreasing family income - less consumption - shift AD in - limiting eco growth
• Long run - low human capital - insignificant rise in productivity - insignificant income increase - limit growth and development

Question 4

Example

Answer 4

• GNI per capita in Madagascar fell from $460 to $240 between 1980 and 1990 - due to poor education