Factors that Lead to Economic Growth
Factors that Lead to Economic Growth
Unit 10 NotesUnit 10 Notes
Economic GrowthEconomic GrowthEconomic GrowthEconomic Growth There are 4 factors of production that There are 4 factors of production that
influence economic growth within a influence economic growth within a country:country: Investment in Human CapitalInvestment in Human Capital Investment in Capital GoodsInvestment in Capital Goods Natural Resources availableNatural Resources available EntrepreneurshipEntrepreneurship
The presence or absence of these 4 The presence or absence of these 4 factors determine the country’s Gross factors determine the country’s Gross Domestic Product for the yearDomestic Product for the year
There are 4 factors of production that There are 4 factors of production that influence economic growth within a influence economic growth within a country:country: Investment in Human CapitalInvestment in Human Capital Investment in Capital GoodsInvestment in Capital Goods Natural Resources availableNatural Resources available EntrepreneurshipEntrepreneurship
The presence or absence of these 4 The presence or absence of these 4 factors determine the country’s Gross factors determine the country’s Gross Domestic Product for the yearDomestic Product for the year
What is Human Capital?What is Human Capital?
All of the skills, talents, education, and All of the skills, talents, education, and abilities that human workers possess---abilities that human workers possess---and the value that they bring to the and the value that they bring to the marketplacemarketplace Examples: computer/reading/writing/math Examples: computer/reading/writing/math
skills, talents in music/sports/acting, ability skills, talents in music/sports/acting, ability to follow directions, ability to serve as group to follow directions, ability to serve as group leader & cooperate with group membersleader & cooperate with group members
A country’s Literacy Rate impacts A country’s Literacy Rate impacts Human Capital--the percent of the Human Capital--the percent of the population over 15 that can read/writepopulation over 15 that can read/write
All of the skills, talents, education, and All of the skills, talents, education, and abilities that human workers possess---abilities that human workers possess---and the value that they bring to the and the value that they bring to the marketplacemarketplace Examples: computer/reading/writing/math Examples: computer/reading/writing/math
skills, talents in music/sports/acting, ability skills, talents in music/sports/acting, ability to follow directions, ability to serve as group to follow directions, ability to serve as group leader & cooperate with group membersleader & cooperate with group members
A country’s Literacy Rate impacts A country’s Literacy Rate impacts Human Capital--the percent of the Human Capital--the percent of the population over 15 that can read/writepopulation over 15 that can read/write
How does Human Capital How does Human Capital Influence Economic Influence Economic
Growth?Growth?
How does Human Capital How does Human Capital Influence Economic Influence Economic
Growth?Growth? Nations that invest in the health, Nations that invest in the health,
education, & training of their people education, & training of their people will have a more valuable workforce will have a more valuable workforce that produces more goods & servicesthat produces more goods & services
People that have training are more People that have training are more likely to contribute to technological likely to contribute to technological advances, which leads to finding advances, which leads to finding better uses of natural resources & better uses of natural resources & producing more goodsproducing more goods
Nations that invest in the health, Nations that invest in the health, education, & training of their people education, & training of their people will have a more valuable workforce will have a more valuable workforce that produces more goods & servicesthat produces more goods & services
People that have training are more People that have training are more likely to contribute to technological likely to contribute to technological advances, which leads to finding advances, which leads to finding better uses of natural resources & better uses of natural resources & producing more goodsproducing more goods
What are Capital Goods?What are Capital Goods?What are Capital Goods?What are Capital Goods?
All of the goods that are produced All of the goods that are produced in the country and then used to in the country and then used to make other goods & servicesmake other goods & services Examples: tools, equipment, Examples: tools, equipment,
factories, technology, computers, factories, technology, computers, lumber, machinery, etc.lumber, machinery, etc.
What are some capital goods used in What are some capital goods used in our classroom?our classroom?
All of the goods that are produced All of the goods that are produced in the country and then used to in the country and then used to make other goods & servicesmake other goods & services Examples: tools, equipment, Examples: tools, equipment,
factories, technology, computers, factories, technology, computers, lumber, machinery, etc.lumber, machinery, etc.
What are some capital goods used in What are some capital goods used in our classroom?our classroom?
How do Capital Goods How do Capital Goods influence Economic influence Economic
Growth?Growth?
How do Capital Goods How do Capital Goods influence Economic influence Economic
Growth?Growth? The more Capital Goods a country The more Capital Goods a country
has = the more goods & services has = the more goods & services they are able to producethey are able to produce
Money is NOT a capital good, but Money is NOT a capital good, but rather a medium of exchange!rather a medium of exchange!
The more Capital Goods a country The more Capital Goods a country has = the more goods & services has = the more goods & services they are able to producethey are able to produce
Money is NOT a capital good, but Money is NOT a capital good, but rather a medium of exchange!rather a medium of exchange!
What are Natural What are Natural Resources?Resources?
What are Natural What are Natural Resources?Resources?
All of the things found in or on the All of the things found in or on the earth; “gifts of nature”earth; “gifts of nature”
All resources are limitedAll resources are limited Examples: land, water, sun, Examples: land, water, sun,
plants, time, air, minerals, oil, etc.plants, time, air, minerals, oil, etc.
All of the things found in or on the All of the things found in or on the earth; “gifts of nature”earth; “gifts of nature”
All resources are limitedAll resources are limited Examples: land, water, sun, Examples: land, water, sun,
plants, time, air, minerals, oil, etc.plants, time, air, minerals, oil, etc.
How do Natural How do Natural Resources Influence Resources Influence Economic Growth?Economic Growth?
How do Natural How do Natural Resources Influence Resources Influence Economic Growth?Economic Growth?
Countries that have a lot of Countries that have a lot of natural resources are able to use natural resources are able to use them to produce goods & services them to produce goods & services cheaper than a country that has cheaper than a country that has to import natural resourcesto import natural resources
Countries that have a lot of Countries that have a lot of natural resources are able to use natural resources are able to use them to produce goods & services them to produce goods & services cheaper than a country that has cheaper than a country that has to import natural resourcesto import natural resources
What is What is Entrepreneurship?Entrepreneurship?
What is What is Entrepreneurship?Entrepreneurship?
Entrepreneurs have 2 characteristics that make Entrepreneurs have 2 characteristics that make them different from the rest of the labor force:them different from the rest of the labor force: 1. innovative (have creative ideas)1. innovative (have creative ideas) 2. risk taker (use limited resources in an 2. risk taker (use limited resources in an
innovative way in hopes that people will buy innovative way in hopes that people will buy the product)the product)
It can be several things:It can be several things: Starting your own businessStarting your own business Inventing something newInventing something new Changing the way something was previously Changing the way something was previously
done so that it works betterdone so that it works better
Entrepreneurs have 2 characteristics that make Entrepreneurs have 2 characteristics that make them different from the rest of the labor force:them different from the rest of the labor force: 1. innovative (have creative ideas)1. innovative (have creative ideas) 2. risk taker (use limited resources in an 2. risk taker (use limited resources in an
innovative way in hopes that people will buy innovative way in hopes that people will buy the product)the product)
It can be several things:It can be several things: Starting your own businessStarting your own business Inventing something newInventing something new Changing the way something was previously Changing the way something was previously
done so that it works betterdone so that it works better
How does How does Entrepreneurship Entrepreneurship
Influence Economic Influence Economic Growth?Growth?
How does How does Entrepreneurship Entrepreneurship
Influence Economic Influence Economic Growth?Growth? Entrepreneurship creates jobs Entrepreneurship creates jobs
and lessens unemploymentand lessens unemployment Encourages people to take risks, Encourages people to take risks,
and in doing so, they’ve created and in doing so, they’ve created better healthcare, education, & better healthcare, education, & welfare programswelfare programs
The more entrepreneurs a The more entrepreneurs a country has, the higher the country has, the higher the country’s GDP will be…country’s GDP will be…
Entrepreneurship creates jobs Entrepreneurship creates jobs and lessens unemploymentand lessens unemployment
Encourages people to take risks, Encourages people to take risks, and in doing so, they’ve created and in doing so, they’ve created better healthcare, education, & better healthcare, education, & welfare programswelfare programs
The more entrepreneurs a The more entrepreneurs a country has, the higher the country has, the higher the country’s GDP will be…country’s GDP will be…
How is Economic Growth How is Economic Growth Measured?Measured?
How is Economic Growth How is Economic Growth Measured?Measured?
Economic growth in a country is Economic growth in a country is measured by the country’s Gross measured by the country’s Gross Domestic Product (GDP) in one Domestic Product (GDP) in one yearyear
GDP = the total amount of final GDP = the total amount of final goods and services produced in goods and services produced in one year within a countryone year within a country
Economic growth in a country is Economic growth in a country is measured by the country’s Gross measured by the country’s Gross Domestic Product (GDP) in one Domestic Product (GDP) in one yearyear
GDP = the total amount of final GDP = the total amount of final goods and services produced in goods and services produced in one year within a countryone year within a country
Gross Domestic ProductGross Domestic ProductGross Domestic ProductGross Domestic Product
GDP is a domestic measurement GDP is a domestic measurement because it measures only what has because it measures only what has been produced within the country--been produced within the country--this doesn’t include products that this doesn’t include products that are imported.are imported.
It is much better for the economy of It is much better for the economy of a country to produce its own goods a country to produce its own goods and services (this increases the and services (this increases the country’s GDP).country’s GDP).
GDP is a domestic measurement GDP is a domestic measurement because it measures only what has because it measures only what has been produced within the country--been produced within the country--this doesn’t include products that this doesn’t include products that are imported.are imported.
It is much better for the economy of It is much better for the economy of a country to produce its own goods a country to produce its own goods and services (this increases the and services (this increases the country’s GDP).country’s GDP).
Gross Domestic Product
Gross Domestic Product
Measuring the GDP each year Measuring the GDP each year can:can: Compare one country’s economy to Compare one country’s economy to
anotheranother Check a country’s economic Check a country’s economic
progress over timeprogress over time Show if the economy is growing or Show if the economy is growing or
not not
Measuring the GDP each year Measuring the GDP each year can:can: Compare one country’s economy to Compare one country’s economy to
anotheranother Check a country’s economic Check a country’s economic
progress over timeprogress over time Show if the economy is growing or Show if the economy is growing or
not not
Standard of LivingStandard of Living The higher a country’s GDP = a
better standard of living for the people within the country
In order for a country to have an increasing GDP, it must invest in human capital through education & training, and it must produce goods that have value to be sold within the country or exported.
The higher a country’s GDP = a better standard of living for the people within the country
In order for a country to have an increasing GDP, it must invest in human capital through education & training, and it must produce goods that have value to be sold within the country or exported.
SummarySummary To encourage economic growth and raise To encourage economic growth and raise
the living standards of its citizens, there the living standards of its citizens, there must be investment in human capital and must be investment in human capital and capital goods. capital goods.
Economic growth is measured by increases Economic growth is measured by increases in real capital per GDP over time.in real capital per GDP over time.
How large a nation’s GDP can be is How large a nation’s GDP can be is determined by the availability and quality determined by the availability and quality of its natural, human, and capital of its natural, human, and capital resources.resources.
To increase economic growth and per To increase economic growth and per capita GDP over time requires investments capita GDP over time requires investments in both physical capital (factories, in both physical capital (factories, machines) and human capital (education, machines) and human capital (education, training, skills of labor force).training, skills of labor force).
To encourage economic growth and raise To encourage economic growth and raise the living standards of its citizens, there the living standards of its citizens, there must be investment in human capital and must be investment in human capital and capital goods. capital goods.
Economic growth is measured by increases Economic growth is measured by increases in real capital per GDP over time.in real capital per GDP over time.
How large a nation’s GDP can be is How large a nation’s GDP can be is determined by the availability and quality determined by the availability and quality of its natural, human, and capital of its natural, human, and capital resources.resources.
To increase economic growth and per To increase economic growth and per capita GDP over time requires investments capita GDP over time requires investments in both physical capital (factories, in both physical capital (factories, machines) and human capital (education, machines) and human capital (education, training, skills of labor force).training, skills of labor force).