Question

1. Why is economic growth important? In a paragraph or two, explain what you believe to be the key reasons why a growing economy is beneficial to society.

2. Which two factors, in your opinion, are most critical toward fostering economic growth? Explain.

Answer 1

1)

Economic growth refers to the rise in the production of goods and services. The more production of goods and services imply that now more facilities and output would be available for consumption level. The rise in the production of goods and services would cause a rise in the living standards of people. All developed countries have a high standard of living only because of the larger rise in the production of goods and services.

Thus, the growing level of the economy would be beneficial to the economy. But these goods and services must raise the level of people in terms of consumption. A growing economy would not be beneficial if a larger part of GDP is devoted to the military and wartime preparations.

2)

Following are two factors most critical for fostering the economic growth:

• Technological growth: Rise in the development of new technology leads to the rise in the production of goods and services with same level of the inputs. Thus high growth rat is achieved.
• High rate of saving: High saving drives up the investment. And high investment leads to rise in the production of goods and services. Developed countries have been successful in achieving the high growth rate owing to high rate of saving. Japan and Germany are examples of such countries where saving has led to the high growth rate in economy.