In this article, I’m going to tell you about what is economic growth and factors of economic growth or top 10 factors affecting economic growth. – 1stlearner.com
What is economic growth?
Economic growth is an increase in the production of economic goods and services compared to the period from the second period. It can be measured in nominal or actual words (adjusted for inflation). Traditionally, the gross economic product is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternate metrics are sometimes used.
In the simplest terms, economic development refers to the increase in total production in an economy. Often, but not necessarily the average increase in production increased with marginal productivity. This leads to an increase in income, encourages consumers to open their wallet and buy more. That means a high quality of life or quality of life
In economics, growth is usually prepared in the form of work of physical capital, human capital, labor force and technology. Put the increase in quantity or quality of the working age population, with the tools they have to work on. And the recipes they are available for combining labor, capital and raw materials will increase economic production.
10 factors of economic growth or factors affecting economic growth –
Economic development is one of the important indicators of a healthy economy. The biggest impact of long-term development of a country is that it has a positive impact on the level of national income and employment, which increases the standard of living. As the country’s GDP is on the rise, it is more productive and more people are getting employment. Economy development increases the wealth of the population of its country.
The following factors of economic growth are important components in an economy. Improvement or increase in their quantum can increase the economy.
1. Natural Resources:
The discovery of more natural resources like oil, or mineral reserves, can promote economic change. As it increases the production potential curve of the country. Other resources include land, water, forest, and natural gas.
In fact, it is difficult, if not impossible, increase the number of natural resources in a country. Countries should take care to balance the supply and demand for dwindling natural resources so that they do not get destroyed. Better land management can improve the quality of land and contribute to economic development. This is the first factors affecting economic growth.
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2. Human capital:
Increasing investment in human capital can improve the quality of the labor force. This will improve skills, abilities, and training. An efficient labor force puts a significant impact on development. Because skilled workers are more productive. As an example, granting a subsidy to investment or coding academies in STEM students will increase the availability of workers for high-skilled jobs, who pay more than investing in blue collar jobs.
3. Population or labor:
Increasing population means the increase in the availability of workers or employees, which means a high workforce. Because One aspect of being a large population is that it can lead to higher unemployment.
4. Capital formation:
Includes land, building, machinery, electricity, transport and communication media. All these man-made products are produced and acquired as capital formation. Because Capital building increases the availability of labor capital. Which further increases the capital/labor ratios. Labor productivity increases, resulting in an increase in the production and development of the economy.
Another effective factor is the improvement of technology. Technology can increase productivity with similar levels of labor. That can lead to growth and development. This means that the factories can be more productive at a lower cost. Because of technology, There is a possibility of promoting long term growth.
6. Social and Political Factors:
This factor plays the most important role in the economic development of a country. Social factors include customs, traditions, values , and beliefs. That contributes to a large extent in the development of the economy.
For example, a society with traditional beliefs and superstitions opposes adopting modern ways of living. It is difficult to achieve in such a way. Apart from this, government involvement in political factors, such as creating and implementing various policies, is a major part of economic development.
7. Human Resources:
Refers to one of the most important determinants of a country’s economic development. The quality and quantity of available human resources can directly affect the development of an economy.
The quality of human resources is dependent on its skills, creative abilities, training and education. If the human resources of a country are well skilled and trained then production will also be of high quality.
On the other hand, the lack of skilled labor disrupts the growth of the economy. While the surplus of labor is of less importance for economic development. Therefore, the human resources of a country must be adequate in line with the necessary skills and abilities. So that economic growth can achieve.
8. The marketable marketing surplus of agriculture:
With the increase in productivity, the increase in agricultural production is important from the perspective of the development of a country. But what is more important is that the marketing surplus of agriculture increases. Of marketing ‘surplus’ means the excess of production in the agricultural sector. That is essential for the sustenance of the rural population.
The importance of a marketable surplus in a developing economy comes from the fact that the urban industrial population performs on it. With the growth of an economy, the proportion of urban population increases and there is an increasing demand for agriculture. These demands should adequately complete. Otherwise, due to the lack of food in urban areas, the development will decrease.
9. Conditions in foreign trade:
The classical theory of business has been used by economists for a long time to argue that trade between nations is always beneficial for them. In the current context, the principle suggests that at present, less developed countries should be experts in the production of primary products. Because their production has comparative cost benefit. So Developed countries, on the contrary, have a comparative cost-benefit in manufacturing including machines and equipment and accordingly they should be experts.
10. Physical Capital or Infrastructure
Increasing investment in physical capital like factories, machinery and roads will reduce the cost of economic activities. Better machinery and factories are more productive than physical labor. It can increase high productivity production. For example, due to having a strong highway system. The inability to carry raw materials or goods across the country can be reduced, which can increase its GDP.
Thus, Now You all know that What is Economic growth, factors of economic growth or factors affecting economic growth.