Economic Growth Flashcards, test questions and answers
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What is Economic Growth?
Economic growth is a term that describes the overall increase in a nation’s production and consumption of goods and services over time. It is usually measured by an increase in gross domestic product (GDP) or other measures of national income. Economic growth can be caused by factors such as increased productivity, improved infrastructure, increased investment, better technology, higher government spending, stronger consumer confidence and more favorable economic policies. Also important are positive externalities such as access to foreign markets, technological transfer from abroad or population increases due to immigration. The benefits of economic growth go beyond just increasing the standard of living for citizens; it also strengthens a country’s economy, allowing it to compete on global markets more effectively while providing jobs and capital investments which further contribute to its development. Furthermore, sustained economic growth provides governments with additional revenues which they may use towards improving public services such as health care and education.In order for countries to achieve economic growth there must be sound macroeconomic policies implemented by their respective governments. These include fiscal policy setting taxes and controlling government spending monetary policy – controlling interest rates – foreign direct investment – encouraging inward investment into the country – open markets reducing barriers to trade – privatization selling off state owned assets- deregulation opening up protected industries so that competition can drive down prices-and tax reform making the system simpler for businesses and individuals alike . Additionally strong institutions within society including effective property rights protection mechanisms are needed so that investors feel safe investing in new projects within any given market context . To conclude , sustained long-term economic growth requires both prudent macroeconomic policies as well as supportive micro level environments which provide incentives for entrepreneurs looking to take advantage of business opportunities available within an economy moving forward at an accelerated rate .