2.5.1 causes of economic growth

What is economic growth?

An increase in the output of goods and services in an economy over time.

How does capital investment contribute to economic growth?

It enhances productivity and output by increasing physical capital.

What is an example of capital investment?

Building new factories and upgrading transportation networks.

How do technological advancements drive growth?

They increase production efficiency and create new products.

What is an example of a technological advancement contributing to growth?

The rise of information technology boosting productivity in various sectors.

How does human capital development influence growth?

Education and training improve workers’ skills and productivity.

What is an example of human capital development?

Investment in higher education and vocational training programs.

How do natural resources contribute to growth?

Discovery and exploitation of resources can fuel economic expansion

What is an example of natural resource-based growth?

Oil discoveries in Saudi Arabia leading to rapid economic growth.

How can government policies promote growth?

Supportive fiscal and monetary policies encourage investment and spending

What is an example of a government policy supporting growth?

Tax cuts to stimulate business investments.

How do institutional factors support growth?

Strong legal frameworks, property rights, and political stability attract investment.

What is an example of an institutional factor promoting growth?

Stable political environments attracting foreign investment.

How does population growth affect economic growth?

It increases the labor force and consumer base.

What is an example of population-driven growth?

Increased immigration leading to a larger workforce.

What does actual growth refer to?

The increase in real GDP over time, representing the economy’s current performance.

What influences actual growth?

Demand-side factors.

What is an example of actual growth?

A country’s GDP grows from $1 trillion to $1.1 trillion over a year.

What does potential growth refer to?

The increase in an economy’s capacity to produce goods and services.

What influences potential growth?

Supply-side factors like improvements in technology, labor, and capital

What is an example of potential growth?

An economy’s potential output increases due to technological advancements.

How is actual growth measured?

By observing real-time changes in GDP.

How is potential growth measured?

It is an estimate of the economy’s capacity to produce.

What influences actual growth vs. potential growth?

Actual growth is influenced by short-term demand factors; potential growth by long-term supply factors.

How can exports drive economic growth?

Through increased market size, foreign earnings, technology transfer, and job creation.

What is the benefit of access to larger international markets?

Firms can achieve economies of scale.

What is an example of increased market size through exports?

Germany’s automobile industry exports cars globally

Why are foreign exchange earnings important?

They allow countries to import goods and services they cannot produce efficiently.

What is an example of earning foreign currency through exports?

South Korea exports electronics, earning currency to import oil.

How does international trade encourage technology transfer?

Exposure to global competition and partnerships leads to adoption of new technologies.

What is an example of technology transfer through trade?

Chinese firms adopting advanced manufacturing techniques from foreign partners.

How do exports create jobs?

Export industries expand employment, reducing unemployment and increasing incomes.

What is an example of export-led job creation?

Bangladesh’s textile industry employs millions due to export demand.

What is a real-world example of export-led economic growth?

The rapid growth of East Asian countries like China and South Korea, driven by producing goods for international markets.