While do this multiple choice question, I am stuck.
Which of the following is LEAST likely to be associated with a higher rate of economic growth? Choose 1 answer:
A. strong protection of property rights
B. taxes on savings and investment
C. policies that discourage immigration
D. encouraging the replenishment of natural resources
E. higher consumption
I choose C, but the actual answer is E. I am kindly confused. WHY?
For me, the C will leastly increase economic growth because by having more immigrations, the labor force increase which increase the output (real GDP) in long run (at natural rate of unemployment). This increase the aggregate supply and economic growth . So by having policies that discourage immigration, we have lower labor force which have inverse bad effect.
For answer E, I have some hesitations for it when doing the question.It is true that higher comsumption leads to lower saving and high interest rates which decrease company captial investment, but more consumptions means more aggregate demand and more aggregate demands leads to higher ouput???
So what I am I missing and what I did wrong?
Thanks for any suggestions and answer!