3. Growth

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) represents the total monetary value of all goods and services produced within a country's borders over a specific time period, typically measured annually. It serves as a broad indicator of economic activity and health.

Neoclassical Growth Model

The Neoclassical Growth Model posits that long-term economic growth is primarily driven by factors such as technological advancement and increases in productivity, rather than short-term fluctuations in demand.

Productivity

Productivity refers to the efficiency with which goods and services are produced in the economy, often quantified as the amount of output (goods or services) generated per unit of input (labor or capital) over a specific period.

Factors of Production

Factors of Production are the diverse resources utilized in the production process of goods and services, which include physical capital (machinery and buildings), human capital (skills and labor), natural resources (land and minerals), and technological knowledge.

Catch-up Effect

The Catch-up Effect describes the phenomenon where less economically developed countries tend to grow at a faster rate than more developed countries, allowing them to 'catch up' over time in terms of income and productivity.

Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) is a financial investment made by a company or individual in one country into business interests located in another country, typically involving the ownership or controlling interest in a foreign business.

Investment and Growth Correlation

The Investment and Growth Correlation refers to the observed relationship where increased levels of capital investment in an economy are associated with higher rates of economic growth, suggesting that investment plays a fundamental role in enhancing productivity and capacity.

Gross Capital Formation

Gross Capital Formation refers to the net increase in physical assets within an economy over a specified period, accounting for investments in fixed assets and changes in inventories, minus the disposals of those assets.

Macroeconomic Stability

Macroeconomic Stability is characterized by a state of low inflation, consistent economic growth, and low unemployment rates, creating an environment that is conducive to investment and sustainable economic development.

Comparative Advantage

Comparative Advantage is the economic principle that describes a country’s ability to produce a specific good or service at a lower opportunity cost compared to other nations, which encourages trade and specialization.

What may be the reason behind growth?

What influences productivity?

• Rates of human capital, physical capital, and population growth.

• Macroeconomic and geopolitical stability.

• Trade policies and comparative advantage.

• Institutional quality (e.g., governance, transparency, corruption).

• Resource endowments and climate​

• Investment from abroad: Includes foreign direct investment (FDI) and foreign portfolio investment