Factors Affecting Economic Growth | The Blk Projek
Factors Affecting Economic Growth
Economic growth is the increase in production of both economic services and goods in comparison form one period of time to the other. This may be measured either in real or nominal terms. Conventionally speaking, aggregated economic growth is being measured by way of its GNP or the Gross National Product or via GDP or Gross Domestic Product. Even though, there are instances in which alternative metrics are being put into used.
A Dive into Economic Growth
Simply speaking, economic growth is referring to the growth of production that an economy makes. Oftentimes but not necessarily, these aggregated gains in production is in correlation with the increased of average marginal productivity. This results to the increase of consumers in spending more and buying more. This even leads to people taking loans to open a business and create more jobs for the people. Having said that, generating higher quality materials or standard of living.
On the subject of economics, growth is frequently modeled as the function of the following:
- Labor Force
- Human Capital
- Physical Capital and;
In other words, this is improving the quality or quantity of working age population and tools they’ve got to work with. Not to mention, the formula available in combining capital, labor as well as raw materials to deliver enhanced economic outcome.
What Does Growth mean?
There are actually a number of ways that can be done in generating economic growth. First of all is increasing the volume of capital goods that the economy has. Adding capital to economy has the tendency to boost labor productivity.
With more, better and newer tools in place, it only indicates that workers will be more productive.
For an example, a fisherman who uses a net is likely to catch more fish compared to fisherman that uses pointy stick. On the other hand, these don’t mean that we can simply disregard the latter. Someone needs to first engage in some sort of saving or compromise of their current consumption to be able to free up resources and create new capital. The new capital ought to be in the right type, right time and right place for workers in order to be really productive.
Another method of boosting economic growth is through technological advancement or development. One good example of this is the invention of fuel. Before the discovery of gasoline to generate energy, petroleum’s economic value was incredibly low. With the use of gasoline becoming more common and efficient method for transporting goods, it gradually boosts its price and value over time.