Economic growth is the overall growth in an economy. Gross National Product and Gross Domestic Product are the normal measures of economic growth. Because growth can come in many ways, GNP and GDP are not particularly good measures. More so, economic growth can occur from having more people in an economy. If economic growth occurs more slowly than the population growth, then there can be economic growth, but the average person is less well-off. As economic growth is measured as the annual percent change of National Income it has all the advantages and drawbacks of that level variable. There are two types of economic growth, ACTUAL and POTENTIAL. We have to recognise the difference between actual and potential economic growth. Actual Growth: this is the percentage annual increase in national output and is also known as the ‘GDP’ (Gross Domestic Output). This is said to be the rate of growth in actual output produced. Statistics of GDP growth rates refer to actual growth when they are published. This is a table of the GDP Growth rates for the last 10 years. I have included a few countries including the UK: Year U.K. Italy Netherlands Belgium Switzerland Sweden Australia New Zealand 2005 - 0.16 0.94 1.16 - 2.47 2.46 - 2004 3.08 1.22 1.72 2.59 2.07 3.74 3.55 3.48 2003 2.20 0.25 -0.13 0.91 -0.27 1.69 3.07 3.88 2002 1.77 0.38 0.08 1.50 0.31 2.00 4.13 4.46 2001 2.30 1.76 23.31 1.05 1.04 1.07 2.24 3.78 2000 3.86 3.58 3.47 3.86 3.61 4.33 3.33 2.48 1999 2.80 1.65 5.27 10.39 1.31 -1.04 4.32 5.16 1998 3.12 1.81 3.09 2.08 2.79 3.65 5.30 1.00 1997 3.29 2.03 3.83 3.88 1.91 2.44 3.86 2.74 1996 2.69 1.09 3.05 0.85 0.52 1.29 4.32 3.23 1995 2.84 2.92 3.03 2.29 0.38 4.05 3.49 3.74 Source: http://investintaiwan.nat.gov.tw/en/env/stats/gdp_growth.html Potential Growth: This is how quickly the economy could grow. It is known as the percentage annual increase in the economies capacity to produce. Major factors that can contribute to potential economic growth include:- An increase in resources – natural, labour or capital. Increase in the potential with which these resources can be used, through advances in technology, enhanced labour skills or bettered organisation. Actual growth will tend to rise and fall. In some years there can be a high rate of growth; this is when the country will experience what is known as a ‘boom’. In other years quite simply growth is low or negative; this is when the country is in recession a period of ‘slump’ or ‘depression’. This series of booms and recessions is commonly known as the business cycle. There are four ‘phases’ of the business cycle: 1. The upturn – During this phase, a contracting or inactive economy starts to improve, and growth in actual output resumes. 2. The expansion – In this stage there is rapid economic growth: the economy is booming. An extensive use is made of resources and the bridge between actual and potential output narrows. 3. The peaking out – Throughout this phase, growth slows down and can even end. 4. The slowdown, recession or slump – In this period, there is little or no growth and even a decline in output.
In conclusion, regardless of Macropoland’s current economic condition, it is fair to say that it is all part of the business cycle. The business cycle has three parts: peak, trough, and peak. The peak is the date that the recession starts. In Macropoland’s case, the peak would be at the beginning of 1973, its trough somewhere between 1973 and 1974, and then its peak again at 1974. In the second scenario, Macropoland is either at its trough, where it is about to head up again because of its low inflation rate, or it is at its expansion, on its way to heading to its next peak.
Business cycles are defined in the Webster dictionary as “economy-wide fluctuations in production, trade and economic activity in general over several months or years in an economy organized on free-enterprise principles”. These cycles have three main characteristics; expansion, recession, and depression. Expansion is known as increases in the demand for capital and consumer goods. Recession is known as the time when an economy slows down, and the level of sales and production start declining. Depression is know as the Demand for products and services decrease, forcing companies to shut down some production facilities, a period of recession ushers in depression.
Economic growth refers to an increase in the volume of goods and services produced in the economy in a specific period of time (Cave, D, et.al). After being re-elected Malcolm Turnbull stated “We want higher economic growth that provides prosperity to everyone” (Daley, 2016). But since Turnbull became priminister in 2015 the economic growth rate was 2.5% according to the (ABS), and now not much has changed, in fact we have decreased to 2.4% (ABS) as of April 5 2017 and being lower then this before after nearly entering a recession. The coalition however, introduced a policy for growth where they would deliver a company tax cut for small businesses dropping the tax rate for businesses with an annual turnover of less than $10 million, which seemed a very positive move for growth in Australia however this policy has failed due to the negative quarter after this policy was implemented. As GDP (Gross Domestic Product) a main economic indicator for Economic growth shows the near recession, we faced at the end of 2016.
The End of Growth, by Richard Heinberg, goes into deep discussion of the current state of the economy and the its future state when growth ceases. Richard Heinberg discusses current trends within the economy that predict our eventual result. The author makes it very clear that growth is important. As a society, and a planet, we depend on growth. However, certain types of growth, specifically economic growth, are on a path to destruction. He suggests that we find a different definition of growth and focus on that instead of growing from an economic standpoint. Throughout the book, Heinberg uses the image of a balloon to describe our situation. He depicts our society as a balloon that is getting pumped up to be too large and will eventually pop. In other words,
Unstable economy – Economy changes constantly. Changes in interest rates, inflation and unemployment rates affect the demand of the product;
Every year there is a ‘league table‘ published showing the level of economic growth achieved by each country. The comparison is made using each countries Gross Domestic Product, or GDP. An important factor to look at is the difference between actual and potential economic growth. Actual economic growth increases in real GDP. This increase can occur as result of using previously unemployed resources, or reallocating resources into more productive areas or improving existing resources. Whereas potential economic growth is the productive capacity of the economy. For example, it can be shown by the predicted ability of the country to produce goods and services. This changes when there is an increase in the quantity or quality of the resources. All countries have different ways of achieving this with the resources they have available to them. For this reason it party answers the question of why some countries are richer than others. It is widely thought that the productive capacity of an economy will increase each year largely due to improvements in education and technology. This will obviously differ from country to country. For example, in the UK the quality of fertilizer could be improved, hence forth increase the years fruit and vegetable output.
Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
Theoretical model of modern economic growth shows that long-term economic growth and raise the level of per capita income depends on technological progress. This is because of without technological progress and with the increase of capital per capita, marginal returns of capital would diminish and output per capita growth would eventually stagnate (Solow, 1956; Swan, 1956). Studies have shown that “experience, skills and knowledge in the long-term economic growth is playing an increasingly important role” (World Bank, 1999). Despite how technological progress work on economic growth, and how there are different views on the role of in the end, but I am afraid no one would deny that technical progress in the important role of economic development. In this sense, for a country to achieve long-term economic growth, we must continue to promote technological progress. However, economic growth theory is analyzed in general, and usually under the assumption that in the closed economy, and technological progress in a country not normally have taken place in various departments at the same time, and now the economy are often increasingly open economy. In this way, the technological progress in different economic impact on a country may be quite different. In addition, we assume that technological progress is Hicks neutral, is to an industry in itself, but technological progress also reflects the establishment of new industries and development. The new industries and technology-intensive industries generally older than the high, the use of less labor. Even the old industries, the general trend of technological progress is labor-saving.
Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public
The article labeled “Business Cycle,” found on euntrepenuer.com, focuses heavily on the history of business cycles and the effects of
It is natural to be misled by the idea that economic growth is the key
The Gross Domestic Product (GDP) is the total market value of in a country’s output. The GDP is the total market value of all final goods and services produced by factors in within given period of time that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the GDP is the best way to measure the country economy.
1. What impact do natural resources have on economic growth? Will it be possible for a country with few natural resources to grow rapidly? Why or why not.
Economic development is a term that economists, politicians, and others have used frequently since the 20th Century. The concept, however, has been in existence in the West for centuries. The term refers to economic growth accompanied by changes in output distribution and economic structure. It is concerned with quality improvements, the introduction of new goods and services, risk mitigation and the dynamics of innovation and entrepreneurship.