Economic Growth & Development

 Growth and development in a country plays an important role in a country. It is

needed to improve the standard of living and quality of life and to reduce
poverty in a country.

What is Economic Growth?

 Economic growth occurs when there is a QUANTITATIVE increase in a country's
output ( goods & services) or, an increase in a country's real Gross Domestic
Product (GDP) or Gross National Product (GNP).

Factors Affecting Economic Growth

Economic growth is affected by the following factors:
1. investment
2. technical progress
3. balance of payments
4, government expenditure

Investment
 Investment in capital good is undertaken to increase wealth which is required
for economic growth to take place. In order for investment to take place there
must first be savings thus, the government will encourage savings.

Technical Progress
 Increased use of technology will lead to an increase in productivity which leads
to increases in output ( economic growth). Modern Technology can speed up
production and produce goods with more features and of better quality.
However, employees must be trained to use this technology.
Balance of Payments
 An chronic adverse balance of payment ( revenue from export is less than
expenditure from import) will result in a lack of funds to invest in capital goods
which is required for economic growth. Thus, this can also lead to an unstable
economy which can further discourage both foreign and local investors (ripple
effects), leading to further decline in the economy.

Government Expenditure
 Government expenditure can stimulate the economy. If more people have
income to spend then demand for goods and services will increase which will
mean businesses must then produce more.

Benefits of Economic Growth

(1) Increase standard of living for citizens ( once GDP increases at a faster rate
than population size);

(2) Increase tax collected by the government which will be reinvested in the
country for the well being of citizens;

(3) Increased output which will cause businesses to hire more employees thus
reducing unemployment;

(4) Demand for goods and services will increase because more people are
employed thus encouraging business people to invest in the country.
Disadvantages of Economic Growth
 Increased pollution from factories due to increased production;

 Decrease in natural resources ( non renewable);

 Increase in the number of working hours for employees in order to increase

production. This can affect their health and general well being;

 Increased demand for goods and services, because more people are employed,
can lead to increased inflation;

Negative Economic Growth

 Negative economic growth refers to fall in a country’s GDP.

RECESSION
 A RECESSION refers to six months of declining GDP along with increasing
unemployment in a country.