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Economic growth in country X will necessarily have to occur if

June 1, 2025 by rawan239

Economic growth in country X will necessarily have to occur if

there is technical progress in the world economy

there is population growth in X

there is capital formation in X

the volume of trade grows in the world economy

This question was previously asked in

UPSC IAS – 2013

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Economic growth in country X will necessarily have to occur if there is capital formation in X.

Capital formation (investment in physical capital like machinery, infrastructure, and human capital like education, skills) increases the productive capacity of an economy. An increase in the stock of capital, combined with labour, directly leads to an increase in the potential output of goods and services, which is the basis of economic growth. While other factors like technology and labor are also crucial, sustained economic growth fundamentally requires investment in increasing the factors of production or improving their productivity.

Technical progress in the world economy and growth in world trade provide opportunities but do not guarantee growth in a specific country X without internal conditions being met (like capital to adopt technology or participate in trade). Population growth increases the labour supply but doesn’t necessarily translate into growth without sufficient capital and technology to employ the additional population productively; it can even lead to a decrease in per capita income if growth in output doesn’t keep pace.

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