Economic Growth

Causes:

• Economic growth can be caused by technological improvements that lead to an increase in output at a higher quality, for Example the introduction of a new and revised machine that (in comparison to its predecessor) doubles output. Educational improvements that result in a better qualified and more efficient work force will cause economic growth, this would be as a result of their increased range of abilities that allows them to find job and contribute to the economies growth, in addition decreasing the level of unemployment by introducing training programmes would result in further economic growth. Increases in FDI would encourage an improvement in productivity, as well as improvements in capital will result in more efficient and modern facilities that can contribute to countries economic growth. This could also be achieved through increasing government expenditure on sectors that contribute the most to economic growth, if the government were to create free-zones  it would encourage firms to set up within the country, this would decrease unemployment and increase productivity and result in further economic growth.

• Economic Growth could result in increasing inflation, this would be as a result of increased consumer spending. This would have a negative impact on producers and consumers, however producers would benefit from the increase in revenue, this would allow them to further invest in their firm and cause a positive multiplier effect. Producers will end up with increased cost of production that could then be passed on to the consumer - this would mean basic goods and services will take a greater proportion of an individuals disposable income, this would discourage spending, this is the result in the long term. In Addition economic growth would lead increase of the negative externalities associated with economic growth. For example economic growth would result in more air pollution being created as there is greater productivity than before, it would cause further unequal distribution of wealth between classes, an in some casses cause more poverty as a result of the increase in exploitation of workers. Increasing consumption of resources will result in less availability of resources in the long term, this could have massive implications on the economy in the long term as they would no longer be able to sustain the countries consumption without a local market.

• With economic growth comes improved living standards, this is as a result of the increase in real GDP. Consumers generally have more disposable income and are more willing and able to afford more expensive luxury goods, producers will benefit from the increase in revenue as a result of the increase in consumer spending. Economic growth decreases unemployment because of the growing demand for labour from the market, this would have a massive positive multiplier affect on the economy.