A government invests heavily in new roads, railways, and broadband infrastructure. Which cause of economic growth does this best represent?

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Question

A government invests heavily in new roads, railways, and broadband infrastructure. Which cause of economic growth does this best represent?

Accepted Answer

An increase in the quantity of capital goods available in the economy — Award 1 mark for: investment in capital goods (infrastructure) increases the quantity of capital, shifting the production possibility frontier outward and enabling greater long-run productive capacity. B describes human capital development through education, which is a different supply-side cause of growth. C describes a demand-side stimulus to growth (increased consumer spending), not capital investment. D describes a supply-side policy using tax incentives, which is a separate mechanism for encouraging labour supply.

Answer

A rise in consumer expenditure leading to greater aggregate demand

Answer

An improvement in the quality of the labour force through better education

Answer

An increase in the quantity of capital goods available in the economy

Answer

A reduction in income tax rates encouraging greater workforce participation

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