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What is the problem relating to growth policies associated with high income countries?

What is the problem relating to growth policies associated with high income countries?
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Answer #1

The problem is catch-up effect.

In a high-income country people are earning more because resources are used effectively and efficiently. Gross domestic product (GDP) is an indicator of growth; GDP = Consumption expenditure + Investment + Government spending + (Export – Import). Increasing GDP from previous years shows the amount of growth. But GDP could only be increased hugely if the full-employment is too far. Countries having high income are almost near to the full-employment; this is the catch-up effect, and this is the problem of slower growth.

Example: High income countries use advance technologies for production. More improved technology might be required for further growth; which is not possible in the short-run.

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