Growth Rates

Topics: Economic growth, Economics, Gross domestic product Pages: 3 (1018 words) Published: May 14, 2014
What factors might contribute to a low or high growth rates in a country? There are three categories of factors that contribute to a low or high growth rates. These categories are the demand factor, the efficiency factor, and supply factors. Government spending or exports can lead to a higher to aggregate demand and higher economic growth. “Economic growth requires increases in total spending to realize the output gain made available by increased production capacity” (McConnell, 2012, p. 513). One way to accomplish this is by lowering interest rates. Lower interest rates make borrowing cheaper. This encourages consumers to spend more money. Efficiency is attained when resources are used “…in the least costly way to produce the specific mix of goods and services that maximizes people’s well-being” (McConnell, 2012, p. 513). For example, when human resources are not being used to their full potential unemployment will increase. As unemployment increases, total spending will decrease. This will lower growth rates. Supply factors such as increases in natural resources, increases in human resources, increases in the supply of capital goods, and improvements in technology create a higher economic growth rate (McConnell, 2012, p. 512).

Why do some poor countries experience higher growth rates than others when all face the same challenges? Some poor countries experience higher growth rates than others because of its population, its infrastructure, its natural resources, or a combination of these. One example of government infrastructure are the policies related to patents and copyrights. Additionally, poorer countries tend to adopt more advanced technology from richer countries. Leader countries are constrained by technological process.

Why resources are no longer the most important indicators of economic growth disparity among countries? Which other economic and non-economic factors do you think explain the reasons behind growth disparities among...
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