With higher real GDP a society can devote more resources to promoting recycling and the use of renewable resources Investment. Economic growth encourages investment and therefore encourages a virtuous cycle of economic growth. Economic policies Many government departments that form the pivot of an economic cluster, which was set
2.1.2 CONCEPT OF ECONOMIC GROWTH There are different meanings among scholars, about the concept of economic growth. For example, while Herrick and Kindleberger (1983) put it that economic growth involves employment of factors of production in order to produce a higher level of outputs that can improve the quality and standard of living of the people. Economic growth does not only come from expansion or physical factors but due to improvement in both human and physical as well as volume trade (Ranis et al (2000) and Jhingan (1985) cited in Gafar et al (2011)). Ranis et al (2000) in particular, posits that economic growth is a two way relationship. First economic growth induces development of human resources where with increased economic activities
Principle of Economics Gross Domestic Product Explanation about GDP A country that experiences positive economic growth will have more money to spend. How to measure growth of economy? We use gross domestic product (GDP) to measure it. The value of GDP is determined by measurement of monetary terms and inflation. Increase in value of GDP is not a true valuation of the economic growth.
Economic growth is an increase in a country’s capacity to produce goods and services. This occurs when there is a rising demand and an increase in productive capacity. Economic growth in a nation can have several impacts. For example, it can reduce the amount of poverty which leads to people having a higher quality of life and better living standards. Economic growth will give the country more income which means that the government are able to spend more on healthcare, education and technology.
DISADVANTAGES Long term financial development puts an awful effect on the inhabitants of any nation. Long term economic developments may be identified with expansion, as inflations may increase. Inflations usually increase the cost of products on sale, and as the costs are higher, it will be an issue to the nationality in question to be able to buy their needs There is a limited amount of time involved in the growth of an economy as it involves an increase in GDP. The hypothesis and practice are both diverse. The hypothesis is the thing that economists are able to figure out for themselves; however, to be able to use the hypothesis in reality is the main task.
Four Components of Gross Domestic Product (GDP) A measurement universally used for tracking a countries overall productivity called the Gross Domestic Product (GDP). The GDP encompasses four different components called consumption, investment, government purchases and net export. Consumption the first part of the GDP focuses on the purchasing of good or services by citizens. Investments the second part of the GDP centers on the purchasing of goods for companies to improve future production. Government purchases the third part of the GDP covers the government expenditures on goods or services.
It is a great way to tell what a country is excellent at producing and how certain economies can change and grow or decline from year to year. GDP can be measured in a variety of ways such as growth rate for example growth rate is the increase in
It focuses on the aggregate behavior of consumers and firms, the behavior of governments, the overall level of economic activity in individual countries, the economic interactions among nations, and the effects of fiscal and monetary policy.” One measure of economic activity is gross domestic product (GDP), the quantity of goods and services produced within a country during a specific period of time. The figure below displays an example of GDP per capita in the United States during the years 1900-2011. Besides relying on GDP to understand the quantity of goods and service, macroeconomists also rely on models. In this case, the models are used to explain long-run economic growth, the purpose for business cycles, and the role economic policy should play in the macro economy. They are not always accurate explanations of the outcome or growth.
This essay focuses on the negative and positive effects of population growth on economic development. NEGATIVE EFFECTS OF POPULATION GROWTH ON ECONOMIC DEVELOPMENT Government resources are limited, so population growth is seen as using up those limited resources on unproductive investment such as providing for the dependent population (the young (0-14) and the old (65and above) ). These government resources could have been used for capital goods and improving other sectors which might contribute to growth of the economy other than spending them on consumption goods. To support this point Cincotta and Engelman (1997) mention that the growth of GDP can be constrained by high dependency ratios, which result when rapid population growth produces large proportions of children and youth relative to the labour force. Population growth competes with capital formation and as such more is spent on the dependent ratio at
As mentioned there are two different arguments. According to Govindaraju, Rao and Anwar (2011), Wagner’s Law suggests that there is a long-run equilibrium relationship between public spending and GDP. However, referring to Govindaraju, Rao and Anwar (2011), Keynesians view government expenditure as an exogenous policy instrument that influences GDP growth. According to Phua (2014), GDP per capita is defined as sum of gross value added by all resident producers in the economy plus any taxes from products and less any subsidies which are not incorporated in the products value. GDP per capita is calculated without deductions of fictional assets depreciation and natural resources depletion.