2.5
CAUSES OF GROWTH
TRICKLE DOWN EFFECT
an economic theory where all tax benefits, incentives, financial leverage given
to the rich or businesses will result in economic growth
benefits provided the high income earners and businesses
such as tax cuts, deregulation
results in investment, job creation
this will benefit all economic classes
FACTORS CAUSING ECONOMIC GROWTH
CAPTIAL INVESTMENT -
increased investment in physical captial increased productivity and output
TECH ADVANCMENTS
increases productivity
new products to sell
HUMAN CAPITAL DEVELOPEMENT
education and training to improve workers skills
NEW NATURAL RESOURCES
discovery of natural resources fuels growth
GOVERNMENT POLICIES
supportive monetary and fiscal policies that support investment and
spending, e,g tax cuts
POPULATION GROWTH
2.5 1
, increases labour force and consumer base
ACTUAL VS POTENTIAL GROWTH
ACTUAL GROWTH
increase in real GDP over time, represents economies current performance
measured by observing changes in output
POTENTIAL GROWTH
increase in an economies capacity to produce goods and services
long term production potential
measured by improvements in supply side factors e.g tech, labour, capital
IMPORTANCE OF INTERNATIONAL TRADE
INTERNATIONAL TRADE, especially exports can drive economic growth
INCREASED MARKET SIZE
access to larger international markets
can achieve economies of scale
FORIEGN EXCHANGE EARNINGS
exports bring in foreign currency
allows countries to import goods they cannot produce efficiently
NEW TECHONOLOGIES AND TECHNIQUES ADAPTED
EXPORTS CREATE JOBS
reduces unemployment
OUTPUT GAPS
ACTUAL GROWTH RATES VS LONG TERM TRENDS
ACTUAL GROWTH RATE
2.5 2
CAUSES OF GROWTH
TRICKLE DOWN EFFECT
an economic theory where all tax benefits, incentives, financial leverage given
to the rich or businesses will result in economic growth
benefits provided the high income earners and businesses
such as tax cuts, deregulation
results in investment, job creation
this will benefit all economic classes
FACTORS CAUSING ECONOMIC GROWTH
CAPTIAL INVESTMENT -
increased investment in physical captial increased productivity and output
TECH ADVANCMENTS
increases productivity
new products to sell
HUMAN CAPITAL DEVELOPEMENT
education and training to improve workers skills
NEW NATURAL RESOURCES
discovery of natural resources fuels growth
GOVERNMENT POLICIES
supportive monetary and fiscal policies that support investment and
spending, e,g tax cuts
POPULATION GROWTH
2.5 1
, increases labour force and consumer base
ACTUAL VS POTENTIAL GROWTH
ACTUAL GROWTH
increase in real GDP over time, represents economies current performance
measured by observing changes in output
POTENTIAL GROWTH
increase in an economies capacity to produce goods and services
long term production potential
measured by improvements in supply side factors e.g tech, labour, capital
IMPORTANCE OF INTERNATIONAL TRADE
INTERNATIONAL TRADE, especially exports can drive economic growth
INCREASED MARKET SIZE
access to larger international markets
can achieve economies of scale
FORIEGN EXCHANGE EARNINGS
exports bring in foreign currency
allows countries to import goods they cannot produce efficiently
NEW TECHONOLOGIES AND TECHNIQUES ADAPTED
EXPORTS CREATE JOBS
reduces unemployment
OUTPUT GAPS
ACTUAL GROWTH RATES VS LONG TERM TRENDS
ACTUAL GROWTH RATE
2.5 2
