Question

1 List the four principal factors that affect the growth in GDP over time and briefly describe what each means. (b) For each factor, state one government policy that could increase that factor’s contribution to GDP growth.

2 Why should workers care about labor productivity growth?

Answer 1

1) Economic growth in a country is measured by GDP . Rising the GDP of a country can also improve its standard of living . Four principal factors that affect growth in GDP over time are :

a) Natural resources : Natural resources are the the resources or means of production naturally owned by a country , like petroleum , coal etc . This can be used for production or traded with other countries . Government policy of spending in extraction of natural resources makes these resources available at cheaper rates which helps in growth of production . It also assures maximum utilization of resources .

b) Human capital : This is the total productive labour in the country and includes education , training , healthcare etc . Fiscal policy of spending in human capital development can increase productivity .

c) Capital goods : These are produced means of production . Factories , machines , computers etc come under this category . More the amount of capital in a country GDP growth will be faster . So government investment in capital goods help in growth .

d) Enterpreneurship : Risk taking people who start an organization . Government loans , subsidies , easy availiable loanable funds etc can help in GDP growth .