Question

You are to write an essay explaining some ideas that you have regarding what prompts an economy to grow and why that growth differs around the world. I would like you to focus on the aspects of inputs such as labor, capital and technology in your answer to the question and how the quality and quantity of those inputs affects growth in different countries. Your essay should be approximately 1 page

Answer 1

Economy grows because of various factors such as labor, capital and technology. In case of labor hours, there is increase in the number of workers and labor hours which contributes to economic growth. In case of developed countries, they had plenty of capital whereas they lacked labor, so immigration played an important role in supplying that labor. Quality of labor plays an important role as labor has to be skilled when there is advanced technology involved. Too much quantity of labor in the market also acts as an impediment for economic growth as that labor has to be employed in productive resources, if it is not than unemployment rises. It is a serious case in developing countries where there is too much labor. Countries with main emphasis on labor are less likely to witness sustainable growth as it is not long lasting and labor has diminishing returns.

Capital plays an important role in the short run as it supplements the economy with much needed finance for investment. It follows the same principle as labor, regarding that additional output obtained declines when one extra unit is added as it has diminishing returns. Developed countries have more capital such as US and European countries. Developing countries do not have as much access to capital.

Technology is the most significant factor for sustainable long term economic growth. Without technology developed and developing countries alike won't be able to maintain growth as it drives the economy. Yes labor and capital are needed at the same, but they are not as sustainable as technology.

Developed countries such as Great Britain, Germany, Japan, USA have experienced exponential economic growth because of emphasizing technology's role. Spain and Italy have focused on labor and capital which is the reason they have witnessed lower growth rate.