Economic growth may be achieved when economies of scale is realized; this is usually attained through specialization. Specialization enables human capital to be concentrated on the task in which people have developed special skills. Hence through such efficiency time and money could be saved while production levels increase. With specialisation and economies of scale, production is bound to be on the rise. Cassen et al.
Inflation is the rate at which the general level of prices for goods and services is rising, and, then purchasing power falling over a period of time. When price level rises, dollar buys fewer goods and services. Therefore, inflation results in loss of value of money. Inflation is divided into two categories Cost-push and Demand pull inflation: Cost-push inflation means that prices have been hiked up by increases in costs of any of the four factors of production such as (labor, capital, land or entrepreneurship) when companies are already running at maximum production capability. With higher production costs and productivity at it maximum, companies cannot maintain profits by producing the same amounts of goods and services.
Also, the benefits of the public good are enjoyed by all. The producers are able to better plan their production and consumers know when to buy. Macroeconomic variables act as indicators of the current trends of the economy like inflation or recession and anticipate their future trends. Some of the indicators of macroeconomics are as follows: - Growth: Economic growth indicates the expansion of the economy over time and is measured by the performance of the economy over the same period in the immediate past. For eg, the performance in a particular quarter of the economy vis a vis the the same quarter in the previous year.
Cost-push inflation happens when we face higher prices due to the increase in cost of production and higher costs of raw materials. It is determined by supply side factors. Cost-push inflation can be caused by higher price of commodities, imported inflation, higher wages, higher taxes and higher food prices (Economics Help, 2011). Demand-pull inflation happens when there is an increase in the price of goods and services when demand increases too much that it outpaces supply (US Economy, 2015). Sometimes people refer it as “too much money chasing too few goods”.
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.
Influence of inflation on growth velocity of the money explained due to the fact that buyers increase their purchases in order to protect themselves from the economic losses owing to the decrease in purchasing power of money. The coefficient of monetization The important indicator of status of money supply step forth the coefficient of monetization that is equal to: C=M2/GDP The coefficient of monetization permits to answer if there is enough money in circulation. It shows how much GDP provided with money (or how much money is there for $ GDP). In developed countries this coefficient come to 0,6 or even close to
In Econland, the monetary policy that increased money and credit supplying led to inflation. As Milton Friedman said, “inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in
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
Economic growth and economic development In measuring and identifying the factors that stimulate the growth of the economy of a nation such as the Republic of India, a distinction needs to be made between economic growth and economic development. For a nation to experience economic growth, there must be an increase in the gross domestic product (GDP), which is a qualitative measure of the value of all finished goods and services produced in that country within a period of time. However, economic development which is usually measured through the human development index (HDI), includes not only an increase in the output of goods and services, but an improvement in the welfare of individuals within a country. More specifically, economic development looks at the quality of life in a country, with determinants such as mean years of education, access to healthcare, average income per person (measured in GDP per capita) indicating the living standards of a country. Factors that can lead to economic development include foreign direct investment (FDI), increased quantity and quality of human
Investing in education increases human capital per worker. • It is about enhancing the degree to which schooling facilitates the acquisition of professional skills and fosters cognitive skills that foster development. • It is about increasing the innovative capacity of the economy – knowledge of new technologies, products, and processes that promotes