How Does Technology Affect Economic Growth

Economic growth is a growth in the amount of goods and services produced per head over a period of time. Aggregate demand will rise if there’s an increase in investments, which is capital and over time. This increases factors of production and in return is a source of economic growth. GDP relies on a large growth in capital stock so two types of capital is needed for production, structures and equipment. For example automobiles cannot exist if manufacturers are not protected, and even private or public firms need this machinery such as computers to increase output. This output attracts more investments from firms, and firms need quick services and so they invest more in raw materials or increase labour force to speed up production processes

Technological progress has many aspects to it such as increased quantities of output, more quality products, and a large variety of products, this leads to a rise in output in capital or labour depending on given amount. Capital stock reaches a stable level without in involvement of technological progress and therefore ceases the economy from growth, however this technological progress allows the production function to shift upwards by giving the opportunity to produce more output from a level of factor inputs which in return increases the potential level of capital. “Technological progress is the key to a countries long term increase in its material well being” because it involves innovation and invention. Invention is the finding of new and fresh ideas and innovation is the implementing and bringing to life of these ideas, and over a period of becomes a potential source of economic growth. The graph below shows technological progress increases

Economic growth is main factor in individual lifestyle in and economy so if there is growth, reduction of poor living standards will occur. These enhances consumer spending because it increases incomes. An increase in workers real wage rates will result higher purchasing power of a worker and therefore these workers who are also consumers tend to increase their spending, which causes a rise in aggregate demand and aggregate supply in a long run, because there is an increases in aggregate demand and aggregate supply over time it results to growth in output from firms and therefore firms need to employ more workers for continuous expansion and as a result reducing unemployment. A rise in output will also result to improved and more efficient public services as consumer real wage rates increases so does direct taxes, which results to growth in tax revenues government can increase spending on education and health. With all these in place firms become more confident and are able to achieve product efficiency even with even market conditions and so they invest more, and as stated in the first part of this essay investments is a main source of economic