Question

Which of the following points indicate the interrelationship between economic growth and human capital formation?

Options

• Increases the productivity of physical capital

• Innovation of skills

• High participation rate and equality

• All of the above

Answer 1

All of the above

Explanation:

The following is an explanation of the relationship between economic growth and human capital formation:

1. Increases the productivity of physical capital:
   The stock of produced means of production is referred to as physical capital. It is made up of manufacturing plants, machinery, tools, and equipment. The competent personnel manages the productive assets in such a way that they not only increase their production but also ensure that the physical space is used efficiently. When productivity rises, the rate of growth accelerates naturally.
2. Innovation of skills:
   A well-educated individual is more productive and skilled. He has the ability to learn new abilities and invent new procedures that will increase efficiency and productivity. The more skilled and trained employees there are, the greater the chances of the invention.
3. High participation rate and equality:
   A person with a good education is more productive and skilled. He has the capacity to pick up new skills and devise new methods to boost efficiency and productivity. The bigger the number of talented and trained employees, the better the odds of creativity.