2013 Nov (Supply Side) Paper 3 HL
 |
| Matt Ridley - How Innovation Works: And Why It Flourishes in Freedom |
(d) (i) Outline one possible reason for the high level of investment in South Korea.
Low interest rates reduce the cost of borrowing for firms inducing then to borrow more in order to acquire more capital.
(ii) Explain 1 supply side benefit to the South Korean economy of a high rate of investment.
Investment will increase the quantity and/or quality of factors of production thus shifting the LRAS (or, Keynesian AS) to the right and that a rightward shift in the LRAS curve implies an increase in potential output thus enabling higher economic growth or rising employment or lower inflation.
No comments:
Post a Comment