Question

what are the three main sources of economic growth in any economy? how can increased investment help a country achieve increased economic growth?

Answer 1

Answer:

THREE MAIN SOURCES OF ECONOMIC GROWTH :

1. Accumulation of capital stock (CAPITAL)

Capital is one of the most important requirement for any country to tread on the path of economic growth. Without enough funds, no country can experience economic growth.

2. Increase in labor units (RESOURCES)

This can be either the number of employable workforce or the increase in working hours. This is the basic requirement for economic growth if productivity has to be enhanced and demand has to increase.

3. Technological advancement (TECHNOLOGY)

This is also one of the most important factor that helps in economic growth. If the technology is latest and updated, it becomes easy to produce large number of goods and services with exceptional quality.

How does increase in investment help a country achieve economic growth?

Let us first understand what is increased investment.

When investmnet goes up, it means the country is investing into buying more and better machinery, improving infrastructure, builiding bigger factories, buying latest technology, and hence improving its productivity. When investment increases, it leads to better productivity and increase in overall aggregate demand. Because now, the people will have all the available and better products for their needs. And the country can export also if the investment is good. Large number of goods and services will be produced. And when demand goes up, the economic growth is bound to happen. The GDP of the country will improve and there will be development in the country. Investment can also mean better education, improved skills etc which ultimately adds to human capital and thus better outcome and higher GDP (due to advanced services delivered by skilled workforce)

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