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Economic Growth - PowerPoint PPT Presentation


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Economic Growth. 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

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importance
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
slide3

This also increases free time

  • Allows devotion to family, hobbies, & rec activities
slide4

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
slide5

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
slide6

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)
factors influencing economic growth
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
slide8

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
slide9

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
slide10

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
slide12

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
productivity growth
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