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Economic Growth

Economic growth is vital for enhancing a nation's standard of living and quality of life by increasing real per capita output. It enables citizens to enjoy more free time for family and leisure activities while bolstering government spending through an expanded tax base. This growth creates jobs, alleviates social issues, and allows for better public services. Additionally, it fosters international demand for American products, boosting foreign economies and creating a cycle of mutual benefit. Factors influencing growth include land, capital, labor, entrepreneurs, and productivity.

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Economic Growth

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  1. Economic Growth

  2. Importance • Economic growth benefits a country in many ways Standard of Living • Free enterprise economies have the ability to increase real per capita output • This allows people to raise their quality of life • Standard of living = quality of life based on the possession of necessities & luxuries

  3. This also increases free time • Allows devotion to family, hobbies, & rec activities

  4. Government Spending • Economic growth enlarges the tax base- incomes & properties that may be taxed • This increases govt revenues • Helps finance number & quality of public services

  5. Domestic Problems • Economic growth creates more jobs & income • This can alleviate social ills • Issues like: poverty, inadequate medical care, lack of opportunities, & economic insecurity can be solved

  6. Helping Other Nations • Economic growth increases American demand for foreign made products • This creates jobs & generates incomes in outside countries • This enables foreign citizens to buy more goods & services from the US (which should create jobs for us)

  7. Factors Influencing Economic Growth Land • The US has an abundance of raw materials • However, in efforts to conserve our natural resources, we turn to international trade • Resources we take for granted- clean air & water, forests, & fertile land- are dwindling • Few of these are renewable resources- resources that can be replenished for future use

  8. Capital • Growing capital favors economic growth • It improves the capitol-to-labor ratio- total capital stock divided by the number of workers in the labor force • High capitol to labor ratio encourages growth by enabling workers to produce more

  9. The key to this is consumer saving • When consumption drops, factors of production are freed to generate new capitol • Not easy • In some countries, people are so poor they must spend all they earn to exist = little capitol = low output

  10. Labor • For a country to grow, it needs a skilled & growing labor force • This typically is dependent on population • Labor shortage is typically offset by hiring workers in other countries

  11. Entrepreneurs • Countries need risk takers who are willing to innovate • Without this, economic growth will become stagnated • Most entrepreneurs prefer minimal govt regulation & a profitable economic system

  12. Productivity & Growth • Productivity is the efficient use of productive inputs to create goods & services • W/out productivity, econ growth is nearly impossible • This is measured by labor productivity- amount of output produced per unit of labor input • Declining productivity = rising prices & unemployment

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