Question

Question 33 (13.5 points) Many people are trying to solve the puzzle of Growth; why are some countries rich and others poor? For example, there are Two Koreas (South Korea and North Korea), who share same culture, history, language and everything else till 1953 Since 1953, South Korea's economy, measured as GDP per capita, purchasing power parity inflation adjusted), has increased by 252 times, meanwhile North Korea's economy increased roughly 2.5 times. 64K pasno-Sadde/ od 16K Income 2 mg South Korea 1953 2019 (1720 MIR o i D ASUS VIVOBOOK BE 15 home 19 end F10 Poup 111 prt sc Papadh & 5 6 7 8 9 0

Answer 1

In common language a poor person has less income , less wealth,than a rich person. When comparing nations,GDP per capita is the indicator of the economic well being of nations.A country's standard of living is measured by GDP per capita. This helps in measuring economic growth.There are differences in the growth rate of different countries because of differences in inputs ie factors of productionand also in differences in total factor productivity . Total factor productivity refers to the factor productivity of labor and capital.The relation between fator productivity and economic growth is that higher Total factorproductivity leads to higher economic growth. Economic growth of a country helps in alleviating povery.Factors of production and Total factor productivity help economies to grow.Economies which have higher factor productivity will have higher rate of economic growth.This means more goods will be produced which will generate higher incomes and alleviate poverty.Factors which will help countries to increase Total factor productivity and reduce poverty are, first institutions and second is international trade.Institutions are rules that incentivizes people and businesses.Institutions like property rights,free and open markets, rule of law , give incentives to individuals and businesses to produce goods and services.

North and South Korea are examples of the importance of institutions in economic growth.North Korea is a dictatorial communist nation where there is no rule of law,property rights and free and open market. Contrary to this , in Souh Korea,there are  institutions which are instrumental in providing incentive for innovation and productivity.So North Korea is poor and South Korea is rich.