ThatPrickImran
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How will/can the HS2 (high speed railway) lead to an economic growth?

Thanks!


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455409
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We're not doing your homework for you.
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gr8wizard10
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(Original post by james1211)
We're not doing your homework for you.
This.

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Think about infastructure. How would improving (capital as) a factor of production effect the economy? What will happen to the productive potential of the country? Be creative.
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ThatPrickImran
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(Original post by Abdul-Karim)
This.

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Think about infastructure. How would improving (capital as) a factor of production effect the economy? What will happen to the productive potential of the country? Be creative.
It's not my homework. I'm interested.


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ThatPrickImran
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(Original post by james1211)
We're not doing your homework for you.
It's not my homework. I was wondering if the hs2 would lead to an economic growth..


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SecretDuck
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It would speed up access between cities. Think about what would happen to Manchester and Birmingham in particular.
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Puddles the Monkey
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You could also think about how it might affect housing shortages
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gr8wizard10
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(Original post by ThatPrickImran)
It's not my homework. I was wondering if the hs2 would lead to an economic growth..


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Well in that case, it depends whether we're talking theoritically or practically. Under the assumption of Cetaris Paribus, we can assume that its an improvement in capital making travel more efficient. So theoritically, should lead to an increase in national output because of Investment spending by the government (as shown below) and a potential boost in LRAS.

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However, in the real world there are so many things that effect Real GDP growth. So you'll be unable to gain a real figure of whether or not HS2 will directly help increase economic growth, as you'd be discarding all the other factors. Besides.. I doubt it'd make any significant difference, it would just help people get around.
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SecretDuck
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(Original post by Puddles the Monkey)
You could also think about how it might affect housing shortages
Yeah, people would be able to commute from other cities to London realistically. Not long before we can commute from Antarctica to London in 30 minutes
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455409
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The main idea of H'S is simply to knock down houses along the route to raise national house prices.

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ddrrzzeerr
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You have the direct demand effect. They need people and materials to build it and which will temporarily increase demand for these things. How much of this will cause economic growth and how much will crowd out other investments depends on which model you believe. Obviously this effect is a relatively short run effect because it only lasts until the project is complete, even though it will be years.

Once it is finished, the fact you have improved the service is economic growth in itself. After all, economic growth is defined as an increase in the value of goods and services produced by the economy. The utility of individuals will increase because they prefer lower journey times. HP2 will not provide the service as a one off but will continue to do it for years meaning people are better off for years.

May be I have just stated the obvious so far. I think a more interesting way to think about it is giving people an increase time. Private users will use a lot of the extra time for leisure but they will use some of it to work more. Business users will have less time taken out of their day travelling so they will have more time for productive activities. Both these will increase output supply in other industries.

None of this sounds that important compared to the overall size of the economy and it isn't really but nothing is. Long term growth requires increases in the productive capacity of the economy which is made up of a lot of small parts. If there was an easy solution, all the world's problems would be solved but since there isn't we have to start somewhere and HP2 is a big project even if it has a small impact.

HP2 won't provide continued growth for years, the benefit won't increase over time, it will come as a jump then remain constant but no project will. To continue to achieve growth we need to continue to complete projects.
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danlocke
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I think one of the largest issue is the time lag- it isn't due to open until 2026 (that is if construction begins in 2017), but we can't say for sure if there will be substitutes available then making HS2 redundant. For example, lots more business may be conducted over the internet, e.g. video conferencing for meetings, reducing the need to travel.
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SamTheMan95
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Initial increase in AD due to investment ''x'er as this is an injection into circular flow of income. Productive capacity increasing when job is done ( LRAS -> ) as Labour becomes more geographically mobile. This reduces Labour costs and makes goods more price competition, ceteris paribus, increasing exports, AD shifts ->.

In conclusion, how the heck doesnt HS2 create growth?? Well thats what you put in your big evaluation point ( think time lags, size of 'x'er depends on.....lower Labour costs wouldnt be achieved if)
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