Question

what are the ingredients for economic growth?

Answer 1

Economic growth refers to the increase in the production of goods and services during a given period of time. One of the indicator of Economic Growth is GDP.

Factors that will lead to an increase in the Economic Growth are as follows:

1. Increase in demand : The demand for an economy can be increased due to the higher wages and salaries. The lower interest rate can expand the borrowing capacity of an individual thereby can increase the demand. Devaluation of our currency will make the exports cheaper and imports costlier. This will increase the domestic demand.

2. Increase in Production Capacity : An increase in production capacity means the greater output can be produced with the help of new technology , improved management skills , better knowledge and skills.

3. Expansionary Fiscal Policy : Increasing the Government Expenditure will contribute to higher Economic Growth. Cutting down of taxes will expand the aggregate demand.

4. Expansionary Monetary Policy : Various monetary policies can be used to expand the Economic growth. Various measures can be used to expand the aggregate demand by reducing the repo-rate, bank rate,CRR and SLR etc.