Which of the following factors does NOT contribute to economic growth?

• A. Technological innovation
• B. Negative externalities that increase social costs
• C. Investment in human capital
• D. Efficient allocation of resources

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of economic growth, which refers to the increase in the production of goods and services in an economy over time, typically measured by the growth rate of real GDP.
2. Step 2: Identify factors that contribute positively to economic growth, such as technological innovation, investment in human capital (education and skills), and efficient allocation of resources, all of which enhance productivity and output.
3. Step 3: Recognize that negative externalities, which are costs imposed on society that are not reflected in market prices (e.g., pollution), increase social costs and can hinder economic growth by reducing overall welfare and efficiency.
4. Step 4: Analyze why negative externalities do NOT contribute to economic growth: they create inefficiencies and can lead to resource misallocation, thus acting as a drag on growth rather than a driver.
5. Step 5: Conclude that among the options given, negative externalities that increase social costs are the factor that does NOT contribute to economic growth.