by Taylor Hamilton Taylor Hamilton No Comments

Factors that Determine the Rate of Growth of an Economy

An increase in the amount of goods and services that a particular economy can produce in a given time is what is referred to as economic growth. Policy makers across the globe believe that economic growth is good, whether it comes about due to increase in consumer spending or through exportation of products. However, it should be noted that, unchecked or unstable economic growth will always come at a cost to the citizens of that nation. For example, increase in inequality in income distribution might result to political turmoil which could hamper the growth of the economy after some time. As such, policy makers and the experts of economic matters are tasked with a duty to ensure that there is health growth that may result from a variety of reasons.

First, increases in productivity will result to growth of the economy. For example, an increase in output will translate to increased revenue or gross domestic product to a country. On the other hand, economists will measure input levels with the amount of capital invested or the workforce. As such, the economy is said to be growing when the output of the country will be exceeding its input. For example, great wealth creation is associated with high productivity.

Population growth is also associated with the growth of an economy. As the population increases, so does the economy grow. Such an assumption is attributed to the fact that people produce and consume using the wages that they earned after working. Additionally, as the population grows, the demand for goods and services also goes high which consequently results to a rise in the national productive rate.
Finally, education level and health status of a nation will determine how the economy will change. It is clear that people that are well-educated with good health will contribute greatly to productivity that will result to high economic growth rate.