(i) Describe the aggregate production function and use it to briefly describe how economists believe that economies grow.

(ii) Using the concept of the aggregate production function, briefly describe three sources of economic growth.

(iii) From 1990 to 2010 the gross savings rate of China was approximately 45% of GDP. During the same period the gross savings rate of the United States was less than 15%. Explain how these facts can explain why the Chinese economy grew much faster than the U.S. economy from 1990 to 2010. Refer to the aggregate production function and sources of growth in your answer.

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i The aggregate production function is a theoretical framework used by economists to model the relationship between inputs such as labor and capital and output such as goods and services in an economy ... View the full answer