Question

Why is economic growth important to us and what are the most important/critical factors that contribute to growth?

What is holding the US economy back from achieving the desired 4% growth?

Answer 1

Economic Growth:

Economic growth means an increase in real GDP - an increase in the value of national output, national income and national expenditures. Benefits of economic growth means higher standard of living, higher real income and devote more resources.

Importance of economic growth:

1.Higher average income: Economic growth means each and every person who live in the particular country consume more goods and services and enjoy higher standard of living.

2. Lower unemployment: Higher output and positive economic growth, firm will start employ more workers and generating more employment.

3.lower government borrowing: Economic growth tends to generate high tax revenue, and their will be less need to spend money on benefit of employees.

4. Improved public service: Higher economic growth means higher tax revenue and this enables the government can spend more on public service.

5.Investment: Economic growth appreciate firm to invest more which may help in future demand.

6. Economic development : high economic growth means better economic development and reduce in poverty and increase in life expectancy.

Factors that affect the economic growth of a country :

1.Human Resources: quality and quantity of available human resources both directly effect the growth of an economy. Human resources quality means skills, creative ability, training and education. Less huaman resources means less production of goods and services which effect the overall economy of an country.

2.Natural resources: natural resources include that resources which are produced by nature like land, plant, water resources and landscape. If their is Less natural resources than their is an difficulty for industries to produce low cost goods. High cost of goods and service means inflation in the economy.

3.Capital formation : capital formation involves land, building, machinery, medium of communication, transportation and power. Capital formation increase availability of labor per capital and productivity of labour capital which increase in output and growth of an economy.

4 Technological Development: Technology plays important role in the development of economy. Low technological instrument means less production of labour, goods and other resources which effect the growth of an economy.

5.social and political factors: social factors involves customers, traditions, values and beliefs which contribute to the growth of an economy to considerable extent.

What is holding the US economy back from achieving the desired 4% growth:

In Short terms run economic growth is possible but in long run to archive certain economic growth is difficult. We can achieve economic growth in Short run in some scenario.

If the demographic outlook for the United States doesn't change materially, Achieving 4% real GDP growth on a secular basis would require worker productivity rates Reaccelerating back to peak levels of 3% per year.This rate of productivity growth has not been seen in major developed economic for nearly 50 years.

Even if 3% productivity was reached, the United States would still need to generate higher participation from its working age population. The dynamic is unlikely, as it would not only require the participantion rates of prime age men and young workers rising back to their previous peaks but also the participantion rate of retiree-aged workers to stay at record level.

Another way U.S. growth could accelerate to a higher rate would be if demographic trends reversed in the United States. This would require an explosion in population growth similar to what was experienced when the baby boomers entered the labor force en masse in the early 1980s, which pushed labor-force growth to a peak of 2.3% per year. Given that the U.S. workers that will enter the labor force over the next two decades have already been born, the only way to achieve this magnitude of reacceleration would be a surge in immigration. Such a policy change to dramatically increase the flow of Foreign workers into the U.S. economy seems highly unlikely in the current political environment. Even if it did happen, productivity growth would need to Reaccelerate substantially as well. In other words, all of these constraints make a long-term move to a muchhigher level of real-GDP growth an extremely challenging proposition.