economic growth
economic growth
Noun | 1. | economic growth - steady growth in the productive capacity of the economy (and so a growth of national income) |
单词 | economic growth | |||
释义 | economic growtheconomic growth
economic growtheconomic growthgrowth in the GROSS NATIONAL PRODUCT (GNP). A distinction can be drawn between theories of economic growth (in ECONOMICS) which emphasize primarily economic variables, such as levels of saving and investment (e.g. the Harrod-Domar model) and those which are more sociological and take account of wider social as well as more narrowly economic factors (e.g. SCHUMPETER or ROSTOW).economic growthEconomic growtheconomic growtheconomic growthan increase in the total real' output of goods and services in an economy over time. Economic growth is usually measured in terms of an increase in GROSS DOMESTIC PRODUCT (GDP) over time, or an increase in GDP per head of population to reflect its impact on living standards over time. Because of the contribution of economic growth to wealth creation, and the fact that it provides the government with extra resources to provide social amenities (without having to raise taxation), most governments accord a high priority to the promotion of economic growth in formulating their ECONOMIC POLICIES.The ability of an economy to produce m ore goods and services on a sustained basis depends on many factors including an increase in the quantity and quality of the labour force. capital stock and natural resources (the basic factor inputs available to it); the efficient use of these resources so as to attain a high level of PRODUCTIVITY; the introduction of new innovative techniques and methods of production and new products. The latter two factors are especially important in the context of a world economy where a country's economic growth rate is materially affected by INTERNATIONAL TRADE influences. Finally, a country's own level of demand needs to be sufficiently buoyant both to ensure the full utilization of its existing resources and to encourage producers to invest in new plant and research and development to enlarge the supply capabilities of the economy over the longer term. Governments can stimulate the growth process by increasing current spending in the economy through taxation cuts (see FISCAL POLICY) and by increasing the money supply and reducing interest rates (see MONETARY POLICY). Additionally, it can operate on the supply-side of the economy by promoting enterprise initiatives and providing resources for improving productivity and research (see INDUSTRIAL POLICIES). ![]() (b) Growth in GROSS DOMESTIC PRODUCT, GROUP OF 7,1981–2003. Source: World Economic Outlook, IMF, 2004. economic growthThe growth of the real OUTPUT of an economy over time. Economic growth is usually measured in terms of an increase in real GROSS NATIONAL PRODUCT (GNP) or GROSS DOMESTIC PRODUCT (GDP) over time or an increase in INCOME PER HEAD over time. The latter measure relates increases in total output to changes in the population. Therefore, if total output rises only a little faster than the increase in population, then there will be only a small improvement in average living standards. Fig. 52 (a) shows changes in the UK's GDP over the period 1987–2003, and Fig. 52 (b) provides some international comparisons of GDP growth.The achievement of a high rate of economy growth is one of the four main objectives of MACROECONOMIC POLICY. The significance of economic growth lies in its contribution to the general prosperity of the community. Growth is desirable because it enables the community to consume more private goods and services, and it also. contributes to the provision of a greater quantity of social goods and services (health, education, etc.), thereby improving real living standards. Rapid economic growth, however, can also contribute to the exhaustion of finite natural resources and exacerbate problems of environmental POLLUTION, congestion and ecological damage. An increase in the growth potential (‘supply side’) of an economy can come about in three highly interrelated ways: (a) more resources:
All three inputs contribute to the growth process, but modern growth theory emphasises the critical role played by capital. The amount of capital is determined by INVESTMENT while the effect of investment in lifting output is shown by the CAPITAL-OUTPUT RATIO. This can be illustrated as follows: the potential rate of growth depends on the proportion of national income that is invested (i) and the capital-output ratio (k) - the amount of capital (K) required to produce one more unit of output (Y) each year: k = K/Y. The formula for growth (g) is given by g = i/k. Thus, if 20% of national income is invested (i = 20%) and if each £1 of new investment produces an extra 25p of income per year (k = 4), then the rate of growth would be 5%;
The ‘demand side’ of an economy is also important. An increase in the economy's potential growth rate can only be taken full advantage of (i.e. potential turned into actual growth) provided the economy is being operated at a high and expanding level of AGGREGATE DEMAND. Keynesian economists in particular place great emphasis on the role of the ACCELERATOR in putting pressure on existing capacity and, by expanding profit opportunities, encouraging businesses to increase investment in new plant and machinery, etc. Economists often distinguish between ‘exogenous’ and ‘endogenous’ growth impulses. The former embraces developments that emerge from outside the existing economic system and that then impact upon it. Earlier economists (the ‘classical’ school) classified population growth (and thus the size of the labour force) and technological progressiveness in this way, with major surges in growth occurring as a result of periodic inventions (the railway, car, aeroplane, radio and electricity). Endogenous growth comes from within the existing economic system and can arise from ‘spill-over’ effects (e.g adaptation of machinery used originally in one activity to some other industrial use), using increasingly specialized equipment, the experience curve, and from ‘freeing up’ markets (e.g. the elimination of inefficient firms and monopolies, the removal of restrictive labour practices, etc.). In reality, it is not possible to distinguish at the margin between the two growth processes. In particular, technological progressiveness is usually an on-going incremental process involving the continuous investment in R&D by firms and governments rather than a series of ‘one-off shocks. The invention of the microchip and the development of computer-based manufacturing and information technologies, as noted above, are good examples of the spread of incremental know-how and applications. Governments can stimulate the growth process by increasing current spending in the economy through tax cuts (see FISCAL POLICY), and by increasing the money supply and reducing interest rates (see MONETARY POLICY). Additionally, they can operate on the supply side of the economy by promoting enterprise initiatives and providing resources for improving productivity and research (see SUPPLY-SIDE ECONOMICS, INDUSTRIAL POLICY). See PRODUCTION POSSIBILITY BOUNDARY, CAPITAL-LABOUR RATIO, CAPITAL-OUTPUT RATIO, CAPITAL-WIDENING, CAPITAL-DEEPENING, POTENTIAL GROSS NATIONAL PRODUCT, DOMAR ECONOMIC-GROWTH MODEL, HARROD ECONOMIC-GROWTH MODEL, SOLOW ECONOMIC-GROWTH MODEL, INTERTEMPORAL SUBSTITUTION, NEW AND OLD PARADIGM ECONOMICS, SUSTAINABLE DEVELOPMENTS. economic growth
Words related to economic growth
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