What Are The Three Variables Of Economic Growth
Economic Growth
Labour, Capital and Technology are three essential ingredients for economic growth. Economic growth is a function of these three variables. The population of a country is the primary determinant of its labour force and determines the size of the economy in the long run. Capital has been the main factor that led to the emergence of modern economies, and it became affordable with the advent of large banks in the 19th century. It enabled easy mobilization of savings for investment in big industrial projects. The economic growth started to pick up as the availability of funds made it easy to finance a wide range of projects. Globally, technology became the decisive factor in the middle of the 19th century due to developments such as electricity and internal combustion engines.
In the prehistoric days, the global economy relied on basic methods to expand and grow businesses. People traded on the basis of Barter System whereby there was a physical exchange of goods and it acted as a stumbling block in the expansion of the global
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The GDP growth rate and employment rate peak up during the expansion phase while the economy reaches its low point during the contraction phase. These business cycles help an economy to get rid of companies that have lost their relevance. The central banks around the world try to moderate economic cycles through various policy tools to maintain the trend growth rate of countries. The IT bubble of 1997--2001 and housing led economic boom of 2003-2008 are two recent examples of global business cycles. The economic landscape of the world includes extremely wealthy countries whose per capita GDP is almost 60 times more than that of bottom 10% countries. The affluent countries of the world are either resource-rich nations such as Qatar (the richest country in the world) or technology powerhouse such Japan, UK,
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