Economic growth

Causes of growth

Causes of economic growth

Increasing quantity or quality of FOP

• Land: discovery of new resources

• Labour: size and quality of workforce

• Capital: higher investment means access to better technology

• Enterprise: encouragement the development of business

Actual and potential growth

• Actual growth: percentage change in GDP, when an economy has actually produced more goods and services

• Potential growth: change in productive potential in a country over time

Impact of economic growth

Consumers

• Positive wealth affect

• Lower prices

• Higher quality goods

• Increased happiness

• Increased inequalities

• Inflation

Firms

• Investment will increase

• Business confidence will improve

• Lower costs

• Higher profit

• Opportunity for new firms to establish themselves

• Business who sell inferior goods may loose out

Government

• Tax revenue increases

• Improve living standards

• Reduce budget deficit

Current and future living standard

• Lower poverty levels

• More goods and services for people to enjoy

• Housing standard and quality of food increases

• May be exploitation of government

• Increased inequalities