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Miscellaneous·Easy

Which of the following is/are the feature(s) of economic growth? 1. Economic growth implies a process of increase in the national income and the per-capita Income. 2. Increase in real income should be over a long period. 3. Increase in income should be based on increase in productive capacity Select the correct answer using the code given below:

Which of the following is/are the feature(s) of economic growth?

1. Economic growth implies a process of increase in the national income and the per-capita Income.

2. Increase in real income should be over a long period.

3. Increase in income should be based on increase in productive capacity

Select the correct answer using the code given below:

Options

  1. a.

    1 only

  2. b.

    2 and 3 only

  3. c.

    1 and 2 only

  4. d.

    1, 2 and 3

    Correct answer

Explanation

The term economic growth is defined as the process whereby the country’s real national and per capita income increase over a long period of time. This definition of economic growth consists of the following features of economic growth:

  • Economic growth implies a process of increase in the national income and per-capita income.

The increase in per-capita income is a better measure of economic growth, since it reflects increase in the improvement of living standards of the masses.

  • Economic growth is measured by increase in real national income and not just the increase in money income or the nominal national income.

In other words, the increase should be in terms of increase of output of goods and services, and not due to a mere increase in the market prices of the existing goods.

  • Increase in real income should be over a long period

The increase of real national income and per-capita income should be sustained over a long period of time. The short-run seasonal or temporary increases in income should not be confused with economic growth.

Increase in income should be based on increase in productive capacity: Increase in Income can be sustained only when this increase results from some durable increase in productive capacity of the economy, like modernization or use of new technology in production, strengthening of infrastructure, like transport network, improved electricity generation etc.

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