Final answer:
To promote economic growth, government policies can focus on human capital deepening, physical capital deepening, and technological gains in a market-oriented economy. Trade policies, including adjusting trade barriers, also have a significant impact. Economic convergence explains why low-income countries may still feel poor despite growth if their GDP per capita lags behind high-income countries.
Step-by-step explanation:
Government Policy and Economic Growth
Governments have several levers to stimulate economic growth, which include:
- Human capital deepening: Investment in education and training to enhance the workforce's skills.
- Physical capital deepening: Enhancing a country's infrastructure such as roads, airports, and internet capabilities, which can improve productivity.
- Technological gains: Encouraging research and development to drive innovation and efficiency.
Operating in a market-oriented economy with supportive government policies provides the optimum environment for economic growth. Policies that encourage trade, a cornerstone for economic development, can also contribute to economic growth. One such policy is the manipulation of trade barriers. While increasing trade barriers can protect domestic industries, it can also potentially hinder growth by limiting market access for exporters and increasing costs for importers.
Economic Convergence and the Feeling of Poverty
Despite periods of rapid growth, a low-income country may feel poor compared to high-income countries due to the concept of economic convergence. For instance, if a low-income country experiences growth, but its GDP per capita remains significantly lower than that of high-income countries, its citizens may still perceive a relative sense of poverty, especially if the growth does not translate into substantial improvement in their standard of living.