Discuss the benefits of long-term economic growth. What are the factors that contribute to economic growth? Provide your perspective as to what our society can do to enhance economic growth.
Benefits of economic growth :
1. Higher average incomes : Economic growth increases the average income of people and enable them to consume more goods and services in the long run. It also improves their standard of living.
2. Reduce Unemployment: The long-term economic growth provides more employment opportunities and hence reduces unemployment.
3. Reduce government borrowing: Economic growth brings high tax revenues and there is less or no requirement to spend on unemployment benefit. This reduces government borrowing.
4. Increased Investment : Long-term economic growth encourages various firms to invest, in order to earn more and meet future demands. Again increased investment increases the pace of economic growth,maintaining a vicious circle of economic growth.
The following are the factors that contribute to economic growth:
Accumulation of capital stock
Rise in labor inputs
A country's economic growth is the result of contribution made by capital, labor and technology. Increase in Capital and labor helps the economy to produce more outputs. Technological advancement is the main driver of long-run economic growth. The more technology we add to our production process the less time it will take to produce more outputs.
Our society can do the following to enhance economic growth:
Encourage innovation: In order to raise economic growth society can encourage people to come up with innovative ideas to start their own business and create jobs for others. This will reduce unemployment and increase economic growth.
Provide education and training: Society can arrange improved education and training programs through various organizations both public and private in order to raise the confidence and abilities of unemployed people to earn more. This will, in turn increase the revenue and help in the continuous development of the economy.
Encourage Savings: Society can encourage people to save more which will enable them to invest as there is higher economic growth. Most of the people want to invest as they need money for their future requirements, so they must be motivated to save more.