ECONOMIC GROWTH

ECONOMIC GROWTH

Economic growth is an increase in the total output of the economy. It occurs when a society acquires new resources or when it learns to produce more by using existing resources.

BENEFITS OF ECONOMIC GROWTH Economic growth raises a country’s overall standard of living. oThis provides people with goods and time for enjoyable leisure activities.

BENEFITS OF ECONOMIC GROWTH Economic growth enlarges the tax base, or the income and properties that may be taxed. o A larger tax base lets government supply more public services and/or lower taxes.

BENEFITS OF ECONOMIC GROWTH Economic growth creates jobs and economic security for more people.

BENEFITS OF ECONOMIC GROWTH Economic growth can benefit the economies of other countries through increased trade. o A successful growing economy can be a role model for developing nations.

FACTORS OF ECONOMIC GROWTH Economic growth depends on the nature of the factors of production and how well they are used. Factors of Economic Growth include: o natural resources o human capital o capital goods o entrepreneurship 7

FACTORS OF ECONOMIC GROWTH Natural resources are the raw materials a country has that make life and production of goods possible. Natural resources affect economic development. Nations rich in natural resources will use them to produce revenue. 8

FACTORS OF ECONOMIC GROWTH How valued a nation’s natural resources are determines how much revenue they produce and how much foreign investment they attract. 9

FACTORS OF ECONOMIC GROWTH Human capital refers to investments in the welfare and training of workers. An increase in human capital enables an economy to produce more of everything that uses human capital. Providing health care, family benefits, and more training and education are all investments in human capital. 10

FACTORS OF ECONOMIC GROWTH An increase in human capital enables an economy to produce more of everything that uses human capital. The more skills and education workers have, the better they are able to work with mistakes and to learn new jobs as technology changes. More developed nations often invest more in human capital than less-developed nations. 11

FACTORS OF ECONOMIC GROWTH Capital goods are goods used to produce things. The ability to invest in capital goods influences a country’s economic growth. An increase in capital goods enables an economy to produce more of everything that uses these capital goods. 12

FACTORS OF ECONOMIC GROWTH For example, an increase in capital goods can result in more factories, office buildings, tractors, or high-tech medical equipment . Producing more goods for sale in a quicker and more efficient way leads to economic growth and greater profit. 13

FACTORS OF ECONOMIC GROWTH Entrepreneurs are creative, original thinkers who are willing to take risks to create new businesses and products. Entrepreneurs think of new ways to combine natural, human, and capital resources to produce goods and services that they expect to sell for a price high enough to cover production costs. 14

FACTORS OF ECONOMIC GROWTH Entrepreneurs risk their money to produce new goods and services in the hope of making a profit. If a new product or service does not become popular, the entrepreneur may not make a profit. This is the risk he or she takes. Economic growth depends on entrepreneurs willing to take chances and introduce new ideas. 15