Economic Growth: Export or Consumption. What Way to Choose?
Economic growth: export or consumption. What way to choose? Economic growth in our days is very important to all countries. It shows that country is getting stronger in economics, and increases welfare of people. Economic growth is defined as an increase in the quantity of countries produced goods and services during specific time period. In economics it is called gross domestic product (GDP). Of course all of those goods and services have to be bought by somebody. It can be exported to other countries and used by foreigners or it can be consumed in domestic market. When the key factor of economic growth is consumption it means that country has high standard of living, so people in such country is happier because they have more money to spend. Consumption increases production which gives more work places and so more people are involved. More people get money, so increases welfare of countries inhabitants. But for that country have to lower taxes for businesses. Small countries should not rely on consumption because there are not very much people which consume, so it can‘t have big impact on economic growth. Consumption has negative effect on prices. It rises and eventually people start to consume less, production also decreases, so consumption is not long-term effect which influences economic growth. Exporting is very important for small countries to grow economically. They have very limited market and if they specialize in some branches and want to get more profit they have to produce more and sell abroad. Export gives more knowledge and ability to get information on new technologies and ideas. This also has big impact on economic growth. As all small countries have to import a lot to satisfy their market, if they would not export, they will have negative trade balance and its negative factor for countries economy. Export has also disadvantages like there many difficulties to export freely, for example restrictions, quotas and etc. Also country can become