Growth accounting

The following, according to growth accounting, are helpful in increasing the growth rate of an economy:

• Stimulate saving
• Stimulate research and development
• Target high-technology industries
• Encourage international trade
• Improve the quality of education

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Primary goal: to raise its per capita GDP, which depends on increasing the country's growth rate of capital per hour of labor. (under New Growth Theory)

Two correct recommendations:

1. provide tax incentives to stimulate savings, and
2. invest in education to raise the population's productivity

(1) Higher savings increase investment in capital.
(2) Increasing investment in education makes labor and machines more productive.
(3) In addition, the New Growth Theory states that knowledge is NOT subject to the laws of diminishing returns.