to what extent is economic growth beneficial for global economies?
To what extent is economic growth beneficial for global economies?
Economic growth is defined as the expansion of the productive capacity of an economy. An increase in resources causes an area to produce more goods or services in a given period of time – as shown on a production possibility frontier (PPF) diagram, where the curve shifts outwards. The PPF is a curve showing the maximum combinations of goods and services that can be produced in a given period with available resources. The improvement in economic efficiency is shown on the diagram where the curve shifts from PPF1-PPF2, which could be as a result of an increase in the total stock of resources available.
An AS/AD diagram can also define the term economic growth through the outward shift in the curve. An aggregate supply curve shows the total amount of goods and services firms would be prepared to supply in the short run at any given overall price level. For example, as a result of an improvement in productivity (such as an increase in the skills of the workforce), firms could produce more output. This would cause the aggregate supply curve to shift outwards. This is shown in the diagram where the curve shifts from AS-AS1. This diagram also shows that there is an increase in full capacity output from RDO1-RDO2, which again can describe economic growth.
There are a number of key drivers of economic growth. These include growth in the size of the labour force, growth in the quality of the labour (improved skills), technological progress and innovation causing productivity improvement, and an increase in the resources available. As all countries are at different stages of development, each factor will vary in importance for a country at a given period in time.
Economic Growth is most commonly measured using Gross Domestic Product (GDP). However, there are a number of problems with measuring economic growth using GDP as prices have increased over time, therefore an increase in GDP may simply signify an
Economic growth is defined as the expansion of the productive capacity of an economy. An increase in resources causes an area to produce more goods or services in a given period of time – as shown on a production possibility frontier (PPF) diagram, where the curve shifts outwards. The PPF is a curve showing the maximum combinations of goods and services that can be produced in a given period with available resources. The improvement in economic efficiency is shown on the diagram where the curve shifts from PPF1-PPF2, which could be as a result of an increase in the total stock of resources available.
An AS/AD diagram can also define the term economic growth through the outward shift in the curve. An aggregate supply curve shows the total amount of goods and services firms would be prepared to supply in the short run at any given overall price level. For example, as a result of an improvement in productivity (such as an increase in the skills of the workforce), firms could produce more output. This would cause the aggregate supply curve to shift outwards. This is shown in the diagram where the curve shifts from AS-AS1. This diagram also shows that there is an increase in full capacity output from RDO1-RDO2, which again can describe economic growth.
There are a number of key drivers of economic growth. These include growth in the size of the labour force, growth in the quality of the labour (improved skills), technological progress and innovation causing productivity improvement, and an increase in the resources available. As all countries are at different stages of development, each factor will vary in importance for a country at a given period in time.
Economic Growth is most commonly measured using Gross Domestic Product (GDP). However, there are a number of problems with measuring economic growth using GDP as prices have increased over time, therefore an increase in GDP may simply signify an