Question

Brazil has a population of about $210$million, with about $150$million over the age of $15$. Of these, an estimated $25$percent, or$37.5$million people, are functionally illiterate. The typical literate individual reads only about two nonacademic books per year, which is less than half the number read by the typical literate U.S. or European resident. Answer the following questions solely from the perspective of new growth theory:

a. Discuss the implications of Brazil's literacy and reading rates for its growth prospects in light of the key tenets of new growth theory.

b. What types of policies might Brazil implement to improve its growth prospects? Explain.

Short answer

a. Low levels of total economic growth in Brazil because In Brazil, reading rates are quite low.

b. Promote educational and training opportunities are policies might Brazil implement to improve its growth prospects

Step-by-step solution

Explanation (part a)

a.

A person who is functionally illiterate is unable to read or write at a high level. It is assumed that $25\%$of adults in Brazil are functionally illiterate.

In other words, one out of every four Brazilian adults is functionally illiterate. In comparison to many other countries, this rate is extremely low.

Furthermore, a typical literate person in Brazil reads less than half as many nonacademic books as a typical literate person in the United States.

That is to say, reading rates in Brazil are extremely low.

Explanation (part a ) continues

Self-teaching is also quite low in Brazil due to low literacy and reading rates. This has a direct effect on the rate of human capital growth.

The information and skills acquired by the work force through education, training, and self-teaching are referred to as human capital.

A low rate of growth in human capital, according to the new growth theory, predicts low levels of innovation and technical improvement, and thus low levels of total economic growth in Brazil.

Explanation (part b)

To promote the country's long-term economic growth. Brazil should establish measures that promote educational and training opportunities.

The government should spend more funding to improving literacy levels in its budget.

Knowledge and human capital expenditures are investments.

If Brazil, or any other country, intends to increase consumption in the future, it must give up some of its existing consumption.