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The charts below show the growth rates of the real GDP for four coun- tries: (i) the United States, (ii) Japan, (iii) France, and (iv) Germany

Economics Dec 15, 2020

The charts below show the growth rates of the real GDP for four coun- tries: (i) the United States, (ii) Japan, (iii) France, and (iv) Germany. In each chart, the dashed line displays the short-run fluctuations (business cycles) of the real GDP growth while the solid line shows the long-run trend of the real GDP growth of the corresponding country. The average real GDP growth falls over time (although at different pace) in each country, as can be seen from the charts below. Which factors might potentially cause slower economic growth in the long-run in these countries? Explain these factors clearly. FRED 100 -- Real GDP at Constant National Prices for United States FRED - Real GDP at Constant National Prices for japan 125 100 oby 7.5 Percent Change from a go 25 mytredink Source: University of Groningen FRED - Real GOP Constant National Prices for France 100 Source: University of Groningen - Real GDP at Constant National Prices for Germany FRED 125 100 ??? ??? ? ? ? Percent room Yar Ago ????????????????? 25 0 as S. -75 3160 1970 2000 1970 2000 Source: University of Groningen Source: University of Groningen

Expert Solution

Answer:

The factors might potentially slower economic growth in long-run in these countries are following as-

1. Capital accumulation:

Its play an important role in economic growth. Higher capital accumulation means higher productivity, efficiency and higher productivity, efficiency means higher production. Higher production (output) increase economic growth and income level. Capital accumulation comes from saving and investment. More capital you have more capital depreciation you have. But in developed countries saving decreased regularly due to higher standard of living and consumption that's why less investment and less saving means less capital formulation and less capital formulation means lower growth rate.

2. Lower inflation:

Lower inflation means lower the consumption level and lower consumption decrease AD and decreasing AD decrease output and price level. In these countries lower inflation are the big cause of slower economic growth.

3. Emerging economy:

Due to the higher and fast growth of new emerging economy like, China, India, Indonesia etc the competition level have increased. These countries have increased their participation in global economy, trade and production. Now China has became the second largest economy in the world and other side the countries like China, Philippines, Singapore, Indonesia has also grow fast and decrease their dependency of developed nations like the US, Japan, EU etc.

4. Economic Downfall:

Due to frequent economic downfall and recession in these economy are the also an important reason of slow economic reasons. You have seen how the EU and the US economy got affected worst during the 2008-09 crisis. The EU's member countries are still struggling like, Greece, Italy, Spain. The USA and the Eu are the good trading partners and damaging their economies negatively affected their economic growth.

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