Economic Growth – Factors, Policies, Costs and Benefits
ECNF02 Individual Assignment
Economic growth can be defined as a positive change in the level of production of goods and services by a country over a period of time. Besides that, nominal growth also can be defined as economic growth that included inflation, while real growth is nominal growth minus inflation. Furthermore, economic growth can be means as an increase in a country's productive capacity, which as measured by comparing gross national product (GNP) in any year with the GNP in the previous year. By increasing in the capital stock, advances in technology, and improve in the quantity and the level of literacy are considered to be the principal causes of economic growth. And in the recent years, the idea of 'sustainable development' has brought in additional factors such as environmentally sound processes that must be taken into account in growing an economy.
Afterward, the economic growth is usually brought about by technological innovation and positive external forces. However the factors that affect the economic growth are the advanced in technology, real income growth, the increasing in the capital stock, and the improvement in the quantity and the level of literacy. First, the advanced in technology can bring the improvement in economic growth. The technology means the application of the knowledge to the practical aims of human life which includes the materials, tools, techniques, and sources of power to make life easier and work more productive. For the example, the advanced in the technology to the agriculture will bring the improve to the economic growth in the agriculture.
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Advanced in the technology to the agriculture
The economic growth in the agriculture
Besides that, the real income growth also can bring the improvement to the economic growth. The real income can be defined as the income of an individual or an organization, or even a country, after taking into consideration the effects of inflation on purchasing power. For the example, ABC Company had just started its business on last month. If the company want to improve its economic growth in the future. So the company must have to increase its real income growth in the future. So that the company must have to improve his stock for trading in case to increase the company's real income growth. If the company's real income growth has increased, the company's economic growth also will increased. Next, the increasing in the capital stock also will improve the economic growth. The capital stock can be defined as the number of shares authorized for issuance by a company's charter, including both common stock and preferred stock. For the example, if a company wants to improve its economic growth, so the company must increases its capital stock to increasing its selling for earning more income for the company. Furthermore, improvement in the quantity and the level of literacy can bring the improvement to the economic growth. Literacy is the ability to make and communicate meaning from and by the use of variety of socially contextual symbols. Besides that, economic literacy are addressed by examining basic goals and assumptions of economic education and by suggesting areas that need systematic attention and investigation. For the example, if a country improves its quantity of literacy, it will help the country to improve its economic growth.
To help the economic growth, you will need, as Chancellor, to maintain the level of demand in the economy. By using fiscal policy and monetary policy, you can influence the level of demand. If you find your economy is growing got a bit slowly, you can try to boost the demand. To do this you need to encourage spending and so you could either cut taxes which are direct taxes and indirect taxes, or cut interest rates. Alternatively, you could as a government spends more yourself by increase the level of government expenditure. And these policies are called reflationary policies. To increase the economic growth, you may want to cut the taxes that there are direct taxes and indirect taxes. Besides cut the taxes, you also may cut the interest rates. At last, you also may increase the level of government expenditure for improve the economic growth. However, tread carefully during you increase the economic growth. Watch particularly the level of inflation, as if demand rises too much, firms may not be able to increase production quickly and prices may rise instead of output. If this happens, you may need to use deflationary policies that are you may increase the taxes that are direct taxes and indirect taxes. Besides you may increase the interest rates. And you may cut the level of government expenditure to prevent the demand will rises too much.
In the economic growth, there are many costs and benefits. First we mention about the costs about the economic growth. The economic growth does not bring the risk-free. Although our material progress measured clearly in part by the growth of national output, income and spending. But if the economic growth grows too quickly, it will bring about short and long-term problems. If the economic growth grows too quickly, it will bring an inflation risk which are the danger of demand-pull and cost-push inflation can be destabilizing for an economy because it puts pressure on interest rates to rise and can cause a loss of competitiveness for domestic business in international markets. Besides, the economic growth grows too quickly can cause the pollution in the environment. Fast growth of production and consumption can create many negative externalities such as increased noise and air pollution and road congestion. The environment pollution can have a negative effect to our quality of life. For the example, the increase 25% of road transport in UK will causes the air pollution and noise pollution in UK. Besides that, the other example is the air pollution in Guangzhou, China. The rising in sulphur dioxide emissions in China are causing environmental harm and economic loss. However, the economic growth grows too quickly will bring the risk of increasing inequalities in income and wealth. That shows the widening between rich and poor and the higher levels of relative poverty. Indonesia is a best example of the risk. In Indonesia, the Indonesia government treats the rich citizen very good. However, the government treats the poor national very bad even though the poor citizen live very hardship, the government also did not giving them some life help.
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At last, the economic growth also will bring a lot of benefits to us. As the saying goes 'a healthy economy leads to higher living standards and greater prosperity for individuals.' The improve in economic growth can brings the improvement in living standards. Growth is a very important channel through which better living standards and lower rates of poverty can be achieved. According to the report which is published in August 2004 by the Asian Development Bank (ADB), rapid growth in many of country in the Asian region has reduced the number of people living on less than $1 a day fell to 22% of the region's population in 2002. That is compares with 34% in 1990 and shows 'considerable progress in the fight against poverty'. Besides that, the improvement in economic growth also can bring the increased output generates new jobs and reduces unemployment. If a country has increased the output generates new jobs, the citizen will live in a higher living standard. However, the other benefit of economic growth is increased the tax revenues that can be used to fund extra spending on public and merit goods and services. The improvement of economic growth can improved the business confidence which can attracted the foreign investment inflows. At last the increased in economic growth can introduced some new technology which can spurs further innovation.
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