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Economic Growth, example of economic growth Causes of economic growth and effects of Economic growth


Economic Growth


It is an increase in level of output of goods and services and measured in terms of value added. Process of economic growth is essentially a dynamic concept and it refers to the continuous expansion in level of output i.e. it refers to forces that generate a positive rate of change over time. For an individual it’s an increase in income, for a firm it’s an increase in profit.

Economic data

According to Poul Romer “Economic growth occurs whenever economic agent takes resources and rearrange them in ways that are more valuable.”

Economic growth example Economic growth is a quantitatively concept which means it’s value can be derived or can interpret mathematically , for example suppose one month ago individual (X) had income of 1000$ now his income rose to 1200$ so for this individual(X) the Economic growth is 200$.



Sources of Economic Growth or causes of economic growth



Economic growth is a complex process and involves several interrelated factors. Economist stress the importance of three major sources of economic progress : 

A)- Investment in physical and human capital - More capital simply means more production or output more output means more growth. Capital is used in  buying Machinery or raw material the more the firms have capital the more it can purchase machinery or raw material.Since they bought machinery or raw materials now firms have to spent capital as a wages to worker as without the workers who will run the machines.thus as a result unemployment rate will be reduced and per capita income of economy will increase when per capita income increases then GDP of the economy increases thus Economic growth.

B)- Technological advances - When a firm got a new technology and if technology increases it's production with same level of input unit (Labor, Resources , land ,input goods). The pace of technological change will depend upon the scientific skill of the country , the quality of education , the amount of money spent on Research and development. (R&D).

C)- Govt Policies- Economic growth is affected by govt policies if govt is charging very high level of  taxes or there is high level of inflation in the country then it will adversely affect economic growth while if there is stable prices, low taxes, competitive market, political stability and defined property rights then it will positively affects economic growth.
causes of economic growth and effects of economic growth

Effect of Economic growth or Importance of Economic Growth-  

Economic growth in the economy increases the happiness by providing more choices to individuals. Economic growth make it possible to release people from agriculture sector to other sector, it increases employment opportunities in the economy.

Rapid economic growth can increase the wage rate in the economy since more firms will established, firms need more labor means labor demand is higher to labor supply it will result in rise in wage level of economy 

In the process of economic growth women are likely to benefit far more than the men. In low income economies large number of women do household tasks. Economic growth in these economies will increase level of women employment. Inequality in wages of men and women will be reduced.
Economic growth can alleviate poverty , income inequality will worsen in the sort term but improves in long run. for example China, India and some African countries.
poverty alleviation via economic growth



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