WHAT IS ECONOMIC GROWTH?

Measure of how much the output of an economy increases ways of

telling this is to examine the GDP AND GNP. This shows how much
money flow around the economy .Growth is measured in real terms.
Business cycle(trade cycle)
useful ways of showing a country's growth record .It shows ups and
downs which most economies go through over a period of years .
At the top of the cycle the growth rate will be relatively high .At the
bottom of the cycle the rate of economy will be low or even
negative.
Factors affecting growth:-

Land :- include all natural resources such as forest ,oil coal

deposits ,countries experience economic growth through more
effective natural resources exploration.
Labour force exploration :-

increase in labour force :-

contribute to economic growth .This can be increased by
immigration changes in demography.

Investment and technology :-growth require capital stock increase

hence investment in new technology .Technology allow new
products to be created .

Government policy:-
government can use combination of fiscal ,monetary ,exchange rate
and supply side policies to stimulate growth.

BUSINESS AND ECONOMIC GROWTH:-

Sales revenue :-
consumers spend high during economic growth. Increase in demand
of many firm products hence increase in sales revenue.

Expansion:-
Increase in demand for firms products generate d by a sustained
period of economic growth may lead to expansion .Some business
are forced into expanding into where they find that they can not meet
demand. Others plan their expansion well in advance .Expansion
involves

recruiting new staff.

Raising finance .

Increasing the size of the premises

moving to new premises

purchasing more assets

taking over competition

Security :-
in a healthy business climate ,a firm is likely to feel more secure in
its decisions it will be able to order from the suppliers with greater
confidence .Firms should be able to hire employees without concern
about being forced to lay them off within a short period of time
.This may result into a firm committing itself more to the work
force ,for example by investing in training programmes.

Planning for the future :-

Growth provide business with confidence in planning for the
future .Higher profit levels should help provide investment funds for
new projects .However confidence in planning for the future will
hinge upon how long the business expect the growth to last.

Increasing costs:-
growth rate is usually a companied by raising costs. Land cost often
raise during such periods.

The effect of lack of growth on business .

Negative economic growth lead to :-

change in consumer demand

Many firms will face a fall in demand for their products .

This is because the the income of consumer tend to fall during such
periods ,forcing them into cutting back on spending .This can lead to
firm redundancies and even closure.

Confidence :there tend to be lack of confidence among business

during a recession .This can result to investment projects being
canceled and orders being lost.

Effects on small firms :-

small firms tend to be vulnerable to recession .They do not have the
finance to withstand periods of negative cash flows.

Possible benefits :-
Firms that survive during recession may benefit from a reduction in
competition ,as there rivals go go out of business .This should put
them in a position to gain a greater share of the market ,especially
when economy pick up.